Wednesday, April 11, 2012

Shell Martinez Plant Closing the Doors to Construction

You may have heard rumors flying around that Shell has decided to get out of the asphalt bitumen market.  As of May 2012 Shell's refinery in Martinez, California will no longer be producing asphalt bitumen as one if its products.  This is largely due to the larger demand for other petroleum products going forward. In recent correspondence, Mark Bouldin, Regional General Manager Americas Specialties of Shell, states: "As you are probably well aware of, this is a very difficult time for the refining industry, both internationally and nationally, and in California specifically.  Hence we have had to focus our initiatives.  Regrettably, given the urgency to streamline and optimize our operations it is impossible to further delay our consolidation beyond the previously announced date without experiencing additional impairments."

Shell's Martinez plant has the capability to produce several types of products from crude oil.  It is capable of converting up to 165,000 barrels of crude a day into products such as automotive gasoline, jet fuel, diesel, petroleum coke, industrial fuel oils, liquefied petroleum gas, asphalt, and sulfur.  With California's economic recession in full swing, Shell has been constantly evaluating the construction market's forecasts for asphalt bitumen.

It's not surprising to hear that with 2013 and 2014 showing little construction funding coming in, Shell has decided to streamline their production facility in Martinez and focus on its other products.  This will undoubtedly leave a gaping hole in the supply of asphalt bitumen to the California markets.  Shell's Martinez Refinery has an estimated capacity of 3,000 tons of asphalt bitumen production capacity per day and is the 4th largest refinery in California.  With the loss of such a big player...the looming question remains whether our asphalt prices will raise yet again in the coming months.            

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