Marathon Chasing 20%+ IRRs with Los Angeles, Galveston Refinery Upgrades
Findlay, Ohio-based Marathon Petroleum Corp. (MPC) is pursuing improvements at its Los Angeles refinery and a hydrotreater project at its Galveston Bay refinery.
MPC’s President Maryann T. Mannen said Jan. 30 during the company’s fourth quarter 2023 earnings call that the Los Angeles refinery improvements would generate an internal rate of return (IRR) on investment of approximately 20% while the Galveston Bay project would generate a return of over 20%.
During the call, MPC’s CEO Michael J. Hennigan said the plans at the refineries were part of a strong capital discipline focus in 2024.
“We are focused on investments that enhance margin and reduce costs in low carbon,” Hennigan said.
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Chasing 20% IRR at West Coast Los Angeles refinery
At MPC’s 363,000 bbl/d Los Angeles County refinery, near the Los Angeles Harbor, the company is pursuing efficiency and modernization improvements. The company plans to make remaining investments of $330 million in 2024 and $145 million in 2025. The improvements are expected to be completed by the end of 2025.
MPC’s Los Angeles refinery processes heavy crude from California’s San Joaquin Valley and Los Angeles Basin, in addition to crudes from the Alaska North Slope, South America, West Africa and other international sources, according to details on the company’s website.
“The Los Angeles refinery is a core asset in our West Coast value chain and is one of the most competitive refineries in the region,” Mannen said. “This investment, once completed, is expected to further enhance its cost competitiveness by integrating and modernizing utility systems, which will improve liability and increase energy efficiency.”
The improvement also addresses new emissions reduction regulations for Southern California refineries, Mannen said.
Improvements—focused on integrating and modernizing utility systems and increasing energy efficiency—aim to improve reliability and lower costs (i.e., opex).
An additional benefit will include MPC’s ability to further reduce its emissions, especially related to nitrogen dioxide. Along these lines, MPC expects to also reduce Scope 1 and Scope 2 greenhouse gas (GHG) emissions with the improvements, the company said.
Chasing 20%+ IRR at Texas coast Galveston Bay refinery
At MPC’s 593,000 bbl/d Galveston Bay refinery in Texas City, Texas, the company is pursuing a project that includes investments to build a 90,000 bbl/d high-pressure distillate hydrotreater. The project aims to strengthen the competitiveness of the refinery by improving the ability to produce higher value finished products.
The project aims to upgrade high-sulfur distillate to ultra-low sulfur diesel and eliminate reliance on lower-value high-sulfur markets, while improving the U.S. Gulf Coast value chain, the company said.
MPC plans to make project investments of $100 million in 2024, $175 million in 2025 and $425 million between 2026 and 2027. The project is expected to be completed by the end of 2027.
“Once in service, the new distal and hydrotreater will upgrade high distillate to ultra-low sulfur diesel, eliminating the need for third party processing or sales into shrinking lower value high sulfur export markets,” Mannen said. “This strategic investment ensures we provide the clean burning fuels the world demands, and further enhances the competitive position of our U.S. Gulf Coast value chain.”
