Lyondell Lightening Crude at Houston With Long Eye on Canada

LyondellBasell Industries NV is lightening the crude slate at its 265,000-barrel-a-day Houston refinery and has a long-term vision of running more heavy Canadian crude there, Chief Executive Officer Jim Gallogly said.

The refinery will work on the smaller of its two crude units during a planned turnaround this quarter to allow it to run more domestic light, sweet crude, Gallogly said in a conference call.

A surge in production of crude from shale fields including the Bakken in North Dakota and the Eagle Ford in Texas have boosted U.S. oil output to the highest level since 1993 and driven down the cost of domestic crude. The U.S. benchmark crude averaged a $5.50-a-barrel discount to Maya in 2012 after averaging a premium every year before 2011.

“Right now, as you know, the WTI and WTS barrels are very, very competitively cracked,” Gallogly said, referring to domestic light sweet and light sour crudes. “We can crack those barrels, too, and we’re starting to bring more of that product into our refinery.”

The turnaround, which also includes work on a coker, is in its early stages right now, said David Harpole, a Houston-based company spokesman. It will be completed before the end of March, and will reduce throughput at the refinery by 80,000 barrels a day this quarter.

More Canadian

The refinery has typically run dense, high-sulfur crude, Gallogly said. Lyondell used to get most of its crude from Venezuela, and has been diversifying its sources in recent years, the company said at a Barclays Capital Industrial Select Conference last year.

In the long run, Lyondell plans to run heavy Canadian crude, which is discounted to Mexico’s Maya crude, the heavy oil benchmark used on the Gulf Coast.

“Over time, heavy Canadian oil is going to be extremely important to this refinery,” he said. “It’s not all getting down there today but as time goes on, that will become more and more powerful to an asset like we have.”

Western Canada Select oil in Alberta was priced at a record $46.54-a-barrel discount to Maya crude on Dec. 14, according to to data compiled by Bloomberg. It was at $41.62 at 12:13 p.m. New York time today.

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