LyondellBasell Would Shut Houston Oil Refinery Early on Major Equipment Failure

LyondellBasell Industries plans to shut its Houston oil refinery by the end of next year, but could close it sooner if an equipment failure hits major units, according to two people familiar with the company's operations.

Such a move could heighten the risk of fuel shortages in the United States and pressure fuel prices, already sky-high due to the economy's recovery from pandemic and disrupted global flows following Russia's invasion of Ukraine.

In April, the chemical maker said it would cease operating the 263,776-barrel-per-day (bpd) refinery by the end of 2023, exiting motor fuels production. It cited the cost of needed overhauls.

Lyondell spokesperson Chevalier Gray said the company previously annouced "it will cease operations of the Houston refinery no later than Dec. 31, 2023."

"In the interim, the company will continue serving the fuels market, which is expected to remain strong near-term," Gray said. "The company determined that exiting the refining business, by the end of next year, is the best strategic and financial path forward."

At least five oil-processing plants also shut during the pandemic, leaving the United States structurally short of capacity for the first time in decades. The U.S. also faces a well-above average hurricane season this year with about half the refining capacity along the Gulf Coast. 

Lyondell's more than 100-year-old Houston plant can produce 89,000 barrels per day (bpd) of gasoline, 44,500 bpd of jet fuel and 92,600 bpd of diesel, according to U.S. government data.

The refinery's major units are its two crude distillation units (CDUs), two cokers, gasoline-producing fluidic catalytic cracker (FCC), sulfur recovery units, and certain hydrotreaters, the people familiar with its operations said.

The refinery sits on 700 acres along the Houston Ship Channel. Its position on higher, inland ground is less vulnerable to impacts from hurricanes than other plants that sit on the coastline.

It remained in operation through Hurricane Harvey in 2017 because of its high elevation even as rival plants shut due to flooding from the several feet of rain that fell on the Gulf Coast over several days.

(Reporting by Erwin Seba; Editing by Kim Coghill and David Gregorio)