The State of Alaska’s Refining Industry · 2020. 12. 6. · Puget Sound (5): 625 MBD Capacity Alaska Refiners use ANS and Cook Inlet Crude Oil; ANS is also a Significant Feedstock

Econ One Research, Inc. 1

The State of Alaska’s Refining Industry

Barry Pulliam

Managing Director

Econ One Research, Inc.

Anchorage, Alaska

December 2016



In Alaska

Three Decades Working in Alaska

Advisors to State of Alaska’s Departments of Law, Natural

Resources and Revenue

Consulted with Alaska Legislature Regarding Petroleum Tax

and Gas Development Issues

Analyzed Competitive Issues Relating to Transportation

Services, Refining and Gasoline Pricing

Prepared Report on the State of Alaska’s Refining Industry for

the Department of Natural Resources and Senate Finance

Committee



Outside Alaska

Worked with Major Oil-Producing States, Including Texas,

Louisiana, New Mexico, Oklahoma and California

Analyzed Competition in the Refinery Industry on the West

Coast for the State of California

Consulted with the Federal Trade Commission Regarding the

Refinery Industry

Worked with Producers and Refiners in the Lower 48


Topics

Industry Basics

Significant Challenges

Product Markets and Logistics

Refined Product Prices

Economic Impact


Alaska’s Refineries

Flint Hills (closed)

ConocoPhillips BP

Tesoro

Petro Star

72 MBD

82 MBD

87 MBD

Capacity

Note: Approximately 70% of Petro Star and Flint Hills throughput is re-injected into TAPS as return oil.

TAPS

Petro Star

Tesoro

Petro Star

Flint Hills

(Closed)

Crude

Throughput

Refined

Product

72 MBD

25 MBD

26 MBD


Alaska and the U.S. West Coast are Part of “PADD V”*

* PADD stands for Petroleum Administration for Defense Districts.


Alaska’s Refiners are Part of Broader Market that Includes

West Coast and Asian Refineries

Alaska (3):

97 MBD Capacity

Hawaii (2):

144 MBD Capacity So. California (7):

1,103 MBD Capacity

No. California (5):

817 MBD Capacity

Puget Sound (5):

625 MBD Capacity

Alaska Refiners use ANS

and Cook Inlet Crude Oil;

ANS is also a Significant

Feedstock for West Coast

Refiners

Alaska Refiners Supply

Product to Alaska;

West Coast and Asian

Refiners also Supply

Product to Alaska

Alaska Refiners Export

Heavy Products to the

West Coast


Significant Challenges Facing Alaska’s Refiners

Small in Scale and Technologically Simple

Inability to “Upgrade” Heavy End of Barrel; By-Product

Demand for Largest Volume Product (Jet Fuel) Declining

Compete in Broader Market With Declining Demand;

Creates “Surplus” Capacity Among Outside Competitors

Distant from Other Potential Markets (Distance Cuts Both Ways)

Fuel Costs Significantly Higher Than Outside Competitors

Few Supply Alternatives, Particularly for TAPS Refiners


Alaska Refineries are Small Relative to

Typical West Coast Refineries

Source: Petro Star; Tesoro; Energy Information Administration; Oil and Gas Journal.

0

50

100

150

200

250

300

350

400

Teso

ro (

So

cal)

Ch

evro

n (

So

cal)

Ch

evro

n (

No

cal)

BP

(W

ash

.)

Teso

ro (

No

cal)

Sh

ell

(N

ocal)

Ex

xo

nM

ob

il (

So

cal)

Vale

ro (

No

cal)

Sh

ell

(W

ash

.)

Ph

illi

ps

66 (

So

cal)

Ph

illi

ps

66 (

No

cal)

Teso

ro (

Wash

.)

Ph

illi

ps

66 (

Wash

.)

Par

Petr

ole

um

(H

aw

aii

)

Alo

n U

SA

(S

ocal)

Vale

ro (

So

cal)

Teso

ro (

Ken

ai)

Ch

evro

n (

Haw

aii

)

US

Oil

(W

ash

.)

Kern

(B

ak

ers

field

)

San

Jo

aq

uin

(B

ak

ers

field

)

Petr

o S

tar

(Vald

ez)

Gre

ka E

nerg

y (

Co

ast

al)

Lu

nd

ay-T

hag

ard

(S

ocal)

Petr

o S

tar

(No

rth

Po

le)

(Th

ou

san

d B

arr

els

Per

Day)

Alaska

Hawaii

California

Washington

Note: Petro Star capacity is calculated as 30% of crude throughput capacity;

~70% of throughput is re-injected into TAPS as return oil.

Alaska


Alaska Refineries are Much Less Complex Than

Typical West Coast Refineries

0

2

4

6

8

10

12

14

CaliforniaAverage

WashingtonAverage

HawaiiAverage

Tesoro(Kenai)

Flint Hills(North Pole)

Closed

Petro Star(North Pole)

Petro Star(Valdez)

Co

mp

lexit

y

Source: Oil and Gas Journal; Energy Information Administration; Penn World.

Very Complex

Simple

Alaska Refineries


Product Demand in Alaska is Significantly

Different Than on the West Coast

41%

16%

30%

18%

16%

54%

13% 12%

Source: Energy Information Administration, SEDS (2014).

Alaska West Coast

41%

30%

16%

13%

Other

Gasoline

Distillate

Jet Fuel

16%

18%

54%

12%


Product Demand Has Declined on the

West Coast and in Alaska Over the Past Decade


0%

20%

40%

60%

80%

100%

120%

2006 2007 2008 2009 2010 2011 2012 2013 2014

As

Perc

en

tag

e o

f 2006 D

em

an

d (

Perc

en

t)

Alaska

West Coast

Down 31%

Down 12%


Jet Fuel Demand is Down by Nearly Half

While Demand for Other Products is Flat


0

500

1,000

1,500

2,000

2,500

3,000

2006 2007 2008 2009 2010 2011 2012 2013 2014

(Mil

lio

n G

all

on

s P

er

Year)

Other Heavy Oil / Distillate Gasoline Jet Fuel

Jet Fuel Down 47%


Product Movement Into and Out of Alaska

10 cpg

25 cpg


Flint Hills (closed)

Tesoro

20 cpg

10 cpg

16 cpg

Cost of In-State Product Movement Can Be Significant

Petro Star

Petro Star

Via Barge

Via Truck

Via Rail

Via Pipeline

2 cpg


Gasoline Prices in Alaska and Hawaii are Similar

Before Addition of Retail Taxes

Source: AAA; OPIS.

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

$4.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

(Do

llars

Per

Gall

on

)

Nov. 2016

Anchorage

Honolulu

Seattle

$2.18

2.24

2.08

$2.99

3.01

2.66

City

Post-

Flint Hills

(2014-2015)

Last

Month

(Nov. 2016)

$3.07

3.01

2.70

Past

Decade

(2006-2015)


Jet Fuel Prices are Similar in All West Coast Locations

Source: Energy Information Administration.

0.00

0.50

1.00

1.50

2.00

2.50

3.00

$3.50

2006 2007 2008 2009 2010 2011 2012 2013 2014

(Do

llars

Per

Gall

on

)

Alaska

Washington

West Coast

$2.61

2.55

2.56

Average

(2006-2014) State/Area


Employment and Earnings for Alaska’s Refining Industry

Source: Econ One Estimates using IMPLAN model and BLS data..

0

10

20

30

40

50

60

70

80

90

$100

With Flint Hills Without Flint Hills

(Mil

lio

n D

oll

ars

)

$45 M

$49 M

$35 M

$35 M

Alaska Refiners Account for

Approximately 10% of

Non-Seafood Manufacturing

Jobs in the State

Highly-Skilled Jobs with

Average Earnings of

~ $136,000 Per Year

Total Direct and Indirect

Wages of $70 Million Annually

Induced &

Indirect

Direct

$94 M

$70 M


Annual Contribution to Alaska's Economy

$199 M

$153 M

0

50

100

150

200

$250

With Flint Hills Without Flint Hills

(Mil

lio

n D

oll

ars

)

Alaska’s Refineries Contribute

More than $150 Million

Annually to the State’s

Economy

Closure of Flint Hills Refinery

Removed ~$50 Million of

Economic Activity Annually

Refining Industry is Key

Supplier to Military, which

Accounts for $2.5 Billion

Annually in Economic

Activity in Alaska

Source: Econ One Estimates using IMPLAN model and BLS data.


Annual Revenues Received by State and Municipal

Governments from Refining Industry

Source: Econ One Estimates.

0

5

10

15

20

25

30

$35

Prior to Flint Hills Closure Current

(Mil

lio

n D

oll

ars

)

RIK

$23 M

Taxes

$10 M

RIK

$14 M

Taxes

$8 M

Alaska Refineries Provide the

State and Municipal

Governments with Over

$20 Million in Additional

Revenues in the Form of Taxes

and Royalty in Kind (RIK)

Purchases Annually

RIK Purchases Provide the

State with ~$1.75/bbl More

than Royalty in Value (RIV)

RIK Volumes Likely to

Increase

Total $33 M

Total $22 M

Documents

The State of Alaska’s Refining Industry · 2020. 12. 6. · Puget Sound (5): 625 MBD Capacity Alaska Refiners use ANS and Cook Inlet Crude Oil; ANS is also a Significant Feedstock