For the first time in 40 years, major oil refineries are being planned for construction in the United States. MMEX Resources and Raven Petroleum both have plans for new refineries to go online in 2019 in Texas, near the Permian Basin and Eagle Ford Shale, respectively. Oil refinery construction in the United States is a rare occurrence; only 14 smaller facilities were built in the past 40 years, so this construction indicates significant growth in the US oil and gas economy.
While many of the oilfields in the US are still feeling the effects of the crude oil price collapse that began in 2014, Texas has weathered the storm, particularly the Permian Basin. Touted for its geology and plentiful reserves, the Permian Basin has garnered tens of billions dollars in land investments since the summer of 2016. According to Jason Carnovale, an oil and gas analyst with the Freedonia Group, “The Permian Basin is occupying the most oil rigs and drilling the most wells in the United States. Activity has been surprisingly robust even with oil prices hovering around $50 per barrel.” The products from these wells need massive amounts of infrastructure, both midstream and downstream, to transport and refine them prior to their end-use. The new refineries are a clear sign that companies are investing long term in Texas oil and gas.
Increased Demand from Mexico
Beyond the incentive of proximity to supply -- the refineries are being planned near two of the most active plays in the US -- there is new demand for gasoline from Texas’s neighbor to the south, Mexico. Mexico’s automotive market has experienced strong growth in recent years and that trend is expected to continue going forward, increasing the need for more gasoline and refined products. However, earlier this year, the Mexican government began rolling back regulations that subsidize gasoline and diesel sold to Mexican consumers, causing a 20% increase in prices. While this may have a limiting effect on demand, the new refineries in Texas are being constructed with the intention of exporting the refined products they produce to Mexico.
Environmentally Friendly Refinery
While an oil refinery is not usually associated with being green, Raven Petroleum’s facility is being touted for its environmentally friendly footprint. The company is taking a multifaceted approach, ensuring it will cause little effect to the surrounding community and decreasing its overall environmental impact. The facility will use geothermal power to provide energy, carbon capture technology to clean its exhaust, and a desalination plant to process water. Additionally, the company boasts that it has purchased an excessively large acreage of land to buffer it from the environment and surrounding community.
For More Information
Although these refineries will not be completed until 2019, Texas has already experienced a great deal of significant activity in recent months, and it is unlikely to slow anytime soon. For more information on drilling in the state of Texas and the Permian Basin, check out The Freedonia Group’s industry study Texas Oil & Gas Drilling Outlook, which offers:
- Historical data and forecasts
- Drilling data for each of Texas’ major basins
- Analysis of the factors affecting drilling
- Significant land acquisitions and infrastructure investment
About the Author:
Daniel Debelius is an industry analyst at The Freedonia Group, where he writes industry studies focused on the US chemical market.