Marathon can up capacity of Louisiana refinery

* Marathon can increase capacity to 545,000 bpd

* Refinery the fourth-largest in U.S. at 436,000 bpd

HOUSTON/NEW YORK, Dec 17 (Reuters) - Marathon Oil Corp MRO.N can increase capacity of its Garyville, Louisiana, refinery by one-fourth to be the second-largest refinery in the U.S., according to a permit granted by state regulators.

The Garyville plant’s capacity remains at 436,000 barrels per day (bpd), company spokesman Shane Pochard said on Friday.

The permit granted in late November by the Louisiana Department of Environmental Quality said the overall per-day capacity has increased to 545,000 bpd.

If Marathon pushes ahead, the Garyville plant would be the second-largest refinery in the country behind Exxon Mobil Corp's XOM.N 560,640 bpd refinery in Baytown, Texas, according to the U.S. Energy Information Administration's ranking of U.S. refineries.

“That filing allows us to, if we choose to, and are able to, increase the capacity in the future, but we have not done that presently,” Pochard said. “Our capacity is still 436,000.”

At that level, the Garyville plant is the fourth-largest refinery in the United States behind Baytown, Exxon's 504,500 bpd refinery in Beaumont, Texas, and BP Plc's BP.LBP.N 437,080 bpd plant in Texas City, Texas.

The Garyville refinery reached its current capacity in early March after an extended turnaround to add 180,000 bpd of capacity and integrate new units was completed. The four-year expansion project cost $3.9 billion.

Most stated refinery capacities are below the maximum capacities at which those plants can refine crude oil into motor fuels. Refining capacity is usually a measure of how much crude oil the plant can intake into crude distillation units on a daily basis.

In March, Rich Bedell, manager of the Garyville refinery, said capacity expansion with existing equipment was usually achieved by improving efficiency and/or the addition of new technology. He also said he thought it was a “good bet” the plant could surpass 450,000 bpd.

The permit said the crude processing capacity increase to 270,000 bpd, up 20,000 bpd, could be achieved with a minor physical modification such as changing control valve trim size or ranging transmitters where necessary in certain units.

The permit said the Garyville plant had already reduced carbon dioxide emissions from several heaters and boilers, enhanced the monitoring system and removed a hydrogen plant. Marathon will instead buy hydrogen to use in plant operations, the permit said.

A report issued this week by Deloitte Services LP said the U.S. refining industry still needed to eliminate 1 million to 2 million barrels per day of capacity to sync up with declining demand for refined products.

So far, about 228,000 barrels per day of capacity has been stricken with the permanent closures of three refineries. But those actions to match capacity have been largely offset by planned capacity additions, including the 180,000 bpd added at Garyville. (Additional reporting by Erwin Seba in Houston)