Wednesday, December 2, 2020

Shell to Shut Its Convent, La. Refinery Amid Pandemic

November 5, 2020

(Photo: Jiri Buller / Shell)

Royal Dutch Shell said on Thursday it will shut down its refinery in Convent, Louisiana, the largest U.S. facility to close since the coronavirus pandemic first hit and devastated economic demand worldwide.

The shutdown, to occur this month, comes after Shell failed to find a buyer.

The refinery is the ninth in North America either to announce a shutdown or to be idled since the pandemic, which has delivered a heavy blow to fuel demand globally. The United States is the world's largest fuel consumer.

Shell said it failed to find a buyer for the 211,000-barrel-per-day refinery after announcing plans to sell it in July.

“After looking at all aspects of our business, including financial performance, we made the difficult decision to shut down the site,” Shell spokesman Curtis Smith said in an emailed statement.

Refining margins have been down substantially since the pandemic started. The gasoline refining margin is currently at $8.79 per barrel, below the threshold where most refiners can profit.

Once the shutdown is complete, Shell will continue to try to divest the refinery, the company confirmed. It expects to sell all but six refineries and chemical plants and is considering closing facilities it cannot sell, the company told investors on its quarterly earnings call this week.

"We recognize the market is not great at the moment in terms of divesting assets... if it's not possible, we'll consider closing and shutting down. That's ultimately, the last option we'd like to pull," said Chief Financial Officer Jessica Uhl on the call.

The company said in 2019 it would structure its operations to match the future market for downstream products with a focus on its chemicals business.

In February, Shell sold its 156,400 bpd Martinez, California, refinery and logistics assets to PBF Energy for $960 million plus the price for oil and refined products on hand.

Shell said it will open a selective voluntary severance program to potentially create other roles for workers.

Late last month PBF Energy said it will shut most refining units at its Paulsboro, New Jersey, refinery.

Elsewhere, Canada’s Come-by-Chance plant in Newfoundland and Labrador has been idled since May. HollyFrontier shut down its Cheyenne, Wyoming, refinery, Marathon Petroleum began closing refineries in Martinez, California, and Gallup, New Mexico, while Calcasieu Refining idled its Lake Charles refinery in southwest Louisiana.

Phillips 66 announced plans to shut its plant in Arroyo Grande, California, in 2023 and plans to reconfigure its San Francisco Refinery to produce renewable fuels.


(Reporting by Laura Sanicola; Editing by Dan Grebler)

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