US Refiners Talk Expansion After Reaping Billions in Tax Gains
(Bloomberg) -- The biggest independent refiners in the U.S. are lining their pockets with billions of dollars in tax reform windfalls just in time to invest in equipment that meets ever-tightening domestic and global environmental rules, making the “liquid freedom” they export cleaner than ever.
“The reduction in the corporate tax rate is a catalyst for incremental investment in the business,” said Gary Heminger, CEO of Marathon Petroleum Corp during the company’s fourth quarter earnings call. Marathon’s 2018 capital investment plan includes $950 million in refining upgrades to make cleaner fuels and export enhancements. Its projects aim to satisfy International Maritime Organization rules that require lower sulfur in distillate by 2020, and U.S. based Tier-3 gasoline standards intended to clean up the air.
Valero Energy Corp will pour $1 billion into growth projects this year, including a $400 million refinery unit that churns out octane to make premium gasoline. It now has $1.9 billion in extra spending cash from the Republicans’ tax overhaul.
U.S. refiners exported staggering amounts of diesel and gasoline last year, hitting records in both categories while continuing to eye more opportunities to expand. But meeting the stringent rules of IMO 2020 promise double-digit returns on investment, according to Marathon’s Heminger.
“And that’s being very conservative on IMO,” he said early Thursday. “We do believe that there is significant upside opportunity with IMO.”
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