New Mexico’s oil and gas industry is taking a major blow as Marathon Petroleum Corp., the largest U.S. independent oil refiner says it will not restart its refinery in Gallup.
The company said it will also not restart a California refinery amid concerns that demand for fuels is not likely to return to levels before the COVID-19 pandemic hit the globe.
Marathon said in a statement it will convert its 166,000 barrel-a-day Martinez, California, refinery near San Francisco into a terminal facility and may add a renewable diesel plant to align with California’s Low Carbon Fuel Standards objectives and Marathon’s greenhouse gas-reduction targets. It will also close the 26,000 barrel-a-day Gallup refinery in New Mexico.
Both refineries were idled in April as Covid-19 decimated demand for refined products like gasoline and jet fuel. Marathon said May 5 during its first-quarter earnings call that Martinez and Gallup were targeted because they are the highest-cost facilities among its 16 refineries. It assumed product demand would improve enough to restart them before the end of the year. Subsequently, gasoline demand briefly improved after a slew of states attempted to reopen their economies around Memorial Day, then stalled as Covid-19 raged anew.
London consultancy Energy Aspects says there is too much global refining capacity and existing refineries will be pressured by new facilities coming online that can operate more efficiently, forcing some shutdowns of older sites. It projects global demand won’t return to pre-coronavirus levels until 2022.
Source: Bloomberg