U.S. refiner survey indicates poor margins could stall aggressive clean-fuels investment plans

Diesel Fuel News, Sept 30, 2002 by Jack Peckham

The poor profitability of the U.S. refining industry this year could stall aggressive investment plans for ultra-low sulfur gasoline and diesel fuels, according to the latest Clean Fuels Clearinghouse (CFC) survey.

The CFC, a sulfur credits trading organization, periodically asks refiners about the status of their plans to produce low-sulfur gasoline and ultra-low sulfur diesel (ULSD).

Of 22 refiners in the latest survey, none would "strongly agree" with the statement, "my company has finalized plans for compliance with ULSD regulations," and only 9% said they would "agree" with that statement.

By contrast, 25% of refiners in an April survey (see Diesel Fuel News 4/29/02, p1) either would "agree" or "strongly agree" that their companies had finalized ULSD compliance plans. Confidence seems to be slipping now.

One thing hasn't changed: Over two-thirds of refiners continue to "agree" or "strongly agree" that U.S. EPA's ultimate specification for non-road diesel fuel will "have a significant bearing on my company's on-road diesel plans."

Concerns about ULSD product distribution remain high, since sulfur cross-contamination could cause big problems in pipelines and terminals (see Diesel Fuel News 8/19/02, p12). Over 80% of refiners "agree" or "strongly agree" that "product distribution is a significant challenge to the production of ULSD," nearly identical to April's survey.

Only 23% "agree" that "my company has made its technology selection for the production of ULSD," a slight increase from April. But another 23% said they're "neutral" on that question, compared to 5% in April. So, technology choice seems to be moving ahead, even if investment plans aren't.

Refiners unanimously agree that the highway ULSD implementation will be "extremely difficult" or "difficult," whereas a few months ago, 11% thought difficulty would be "moderate." Again, confidence seems to be slipping.

More information about the survey is on the web at: www.CFCH.com.