Company News

UPDATE 1-Phillips 66 processed less heavy crude in 2nd qtr due to supply issues: CEO

(Adds details, background)

HOUSTON, Aug 1 (Reuters) - Independent U.S. oil refiner Phillips 66 processed less heavy crude at its nine refineries in the second quarter due to reduced global supply, Chief Executive Greg Garland said during a conference call with Wall Street analysts on Tuesday.

“I think in (the) second quarter, we ran about 6 percent less heavy crude and 3 percent more medium, 3 percent more light,” Garland said.

Among the reasons for the reduced supply, he cited operational problems in Canada’s oil sands in Alberta, reductions by OPEC producers in the Middle East and ongoing political and operational disruptions in Venezuela.

“You’re going to see light/heavy differentials under pressure into the third quarter,” Garland said.

Last week, U.S. refiners Valero Energy Corp and Marathon Petroleum Corp said they planned to run more light and sweet crudes this quarter, continuing a trend away from heavy, sour crudes supplied by Venezuela and other OPEC producers.

Improvements in production at Canada’s Mildred Lake upgrader, which was hit by a fire earlier this year, may lead the differentials between light and heavy crudes to widen later in the year, Garland added.

Heavy and sour crudes are usually harder to convert to motor fuels and are sold at a discount to light and sweet crude oils. Light refers to density and sweet to the amount of sulfur content.

The company plans to operate its nine-refinery network in the mid-90s-percent range of its 1.6 million barrel-per-day (bpd) combined capacity during the third quarter, company officials said.

The refineries ran at 98 percent of their combined capacity in the second quarter.

Garland also said Phillips 66 plans to cut its capital budget for full-year 2017.

“I think you’re going to see we’re going to guide down in terms of capital by several hundred million dollars,” he said, adding the company will announce the results of its mid-year capital review in “the next month or so.” (Reporting by Erwin Seba, editing by G Crosse)