Refinery bottleneck to ease

In a move that could bode well for Americans' gas tanks, the oil industry is quickening its pace of investing in more refining capacity.

Over the past two months, energy companies have announced refinery expansions of almost 1 million barrels of oil per day - nearly 6 percent of the amount of gasoline produced today. More announcements may come this spring.

One expansion already being planned is here at the Marathon Oil refinery - built on a former sugar-cane plantation - which sustained no significant hurricane damage.

If the oil companies follow through on their plans, this would be equal to 50 percent of the expansions over the past decade. The new capacity could help to relieve the persistent tight supplies and price run-ups at the pump, as happened this fall in the wake of hurricane Katrina.

Increasing refining capacity has been the subject of congressional hearings this fall. And related legislation is pending in Congress.

"It looks like refining investment is on the uptick," says Robert Slaughter, president of the National Petrochemical & Refiners Association in Washington. "But there are two cautions: All these additions must be permitted, and people can change their minds."

Among those who have announced expansions are Valero, adding an additional 400,000 barrels per day, and Chevron and ExxonMobil, each adding 75,000 barrels per day. Suncor, Motiva, and Citgo also have expansion plans.

Companies prefer expansions - that is, adding more refining facilities - instead of building new ones on different sites because it's faster and will probably not require new zoning.

Overall, the new planned capacity is expected to come on line in three to five years.

"The pace is quickening," says Mark Routt, an energy analyst at Energy Security Analysis Inc. in Wakefield, Mass. "Even smaller, less sophisticated refineries are reconsidering expansions."

The expansions come as Congress is debating legislation that some hope would encourage new refining capacity by changing environmental regulations and streamlining the permit process. The House has already passed one version that includes a provision to pay oil companies for delays caused by federal, state, or local authorities or for unforeseen litigation. A Senate bill failed to get out of committee by one vote, but it may get attached to another bill, says a staffer.

The Marathon Oil refinery in Garyville, about an hour north of New Orleans, was the last new refinery built in the US - 29 years ago. Late last month, Marathon said it would spend $2.2 billion to add 180,000 barrels per day - equal to 6 million gallons of gasoline, diesel, and kerosene - to its refining capacity of 245,000 barrels per day.

"When you look at our nation's current refinery capacity and see how hard the refineries are run and then add the outlook for increased petroleum demand, you see that there is clearly a need for additional refining capacity," says Gary Heminger, president of Marathon Petroleum Co. LLC, in an e-mail.

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