US refineries were prepared for sanctions on Venezuelan crude
The U.S. refining industry has been resilient in the wake of sanctions against Venezuelan oil and the sanctions aren't significantly affecting operations at the nation's biggest refiner, Marathon Petroleum Corp. its chief executive said at IHS Markit's CERAWeek in Houston.At some point, the refiners need to switch over to the light crude from the shale wells. At this time they are using it to dilute the heavy crude and taking advantage of a price differential. A switch to light crude would make them less vulnerable to imports.
Sanctions were "an overnight decision but we saw this coming a long time ago," said Gary Heminger CEO of Ohio-based Marathon Petroleum.
Heminger said the company buys millions of barrels a crude every day, and only a small portion of that was Venezuelan crude prior to the sanctions. In part, that's because dwindling oil production has forced Venezuela to send crude to other countries where it has contractual or debt obligations and in part because pricing for the Venezuelan crude has decreased its appeal for Marathon's refineries, which who capable of swapping out the crude for other heavy options.
"We're fully optimizing all of our coking and hydrocracking capacity on the Gulf Coast," with Mexican, Canadian and other heavy crude, Heminger he said. Marathon Petroleum has 16 refineries, including one in Galveston Bay and Garyville on the Gulf Coast.
Heminger said most U.S. refiners have been scaling down on Venezuelan for some time.
"Five year ago (sanctions) would have had impact," Heminger said, but no so much today.
The Venezuelan sanctions and Iranian oil sanctions both have put a spotlight on the flexibility the global refining market, he added.
"The silver lining we have ... is the global market can withstand the downturn and crude supply," Heminger said.