“The prospect of energy independence in North America is within our sights.”
Tom Nimbley, CEO of PBF Energy, owner of the former Sunoco Refinery, made that bold statement when he addressed the Oregon Economic Development Foundation at its 20th anniversary banquet held Thursday, December 5 at Maumee Bay State Park.
You would expect the CEO of an energy company with three refineries to be bullish on his industry, but Nimbley couched his prediction with a disclaimer about forward-looking statements. Simply said, what may be within our sights today may prove to be a mirage tomorrow seen through the shifting sands of technology and the political winds.
Consider this example: Five years ago Nimbley said he would have predicted that facilities would be built today to import natural gas because we wouldn’t have enough. But, the opposite is true. Terminals are being built to export natural gas.
Technological advances, including hydraulic fracturing, allow drillers to access shale oil formations in Ohio, North Dakota, Texas, and Saskatchewan. This cleaner, cheaper natural gas coupled with the ability of some U.S. refineries to process the sour crude from the Alberta tar-sand fields is a global game changer.
“North America is indeed the new frontier in energy production,” Nimbley said. Foreign investment is coming here. One example he mentioned is that ExxonMobil is investing more in North America than anywhere else. Less than 10 years ago, that was not the case for major players like ExxonMobil. In 2005 the U.S. imported one million barrels of oil a day; today it exports one million barrels a day.
“We have the ability to process heavier, harsher, cheaper crude oil while at the same time producing an even higher yield of high value products like gasoline, jet fuel, diesel and petrochemical feed stock. This combination gives the U.S. a competitive advantage in supplying export markets in Latin America, Africa and other parts of the world including Europe.”
While U.S. refineries are poised to refine this harsher crude, some large refineries in Europe and the Caribbean are shutting down because they don’t have that capability, he said
“This modern energy revolution will provide the foundation for a manufacturing renaissance that will stimulate the economy throughout all of North America…I say what’s going to happen is people are going to seize that and say, ‘I’m going to build a plant in the United States instead of, say, in Dublin.’”
Next to labor, energy is the next highest cost to many manufacturers. Cheap energy can be the deciding factor in plant location.
The Midwest and Ohio, in particular, are positioned to take advantage of this new dynamic. The Marcellus and Utica shale oil fields in the eastern part of the state hold vast deposits of natural gas.
Nimbley is not alone in his assessment. BP-Husky Refinery in Oregon is undergoing a retooling to process oil from the Alberta tar sands. And, North America Project Development, LLC, a Boston firm, two years ago announced its intention to build the $800 million Clean Energy plant in Oregon to process natural gas.
PBF is also positioning itself to take advantage of this opportunity. Nimbley said PBF will invest $140 million in the next 15 months to upgrade its 282 acre site on the border of Toledo and Oregon.
Oregon’s two refineries employ more than 1,000 skilled workers and typically have on site another 600 plus contractors. A few years ago, PBF’s predecessor, Sunoco, which it purchased in 2011, estimated its refinery had an economic impact of $3.4 billion on the Toledo area economy and provided the City of Oregon with 16 percent of its income tax revenue. Nimbley’s comments were music to the ears of Mayor Mike Seferian and council members who were among the 175 business and civic leaders attending the banquet.
Nimbley gave them something else to cheer. He said crude oil production will increase at a six percent per year clip until 2020. As there are no pipelines from these newer producing wells and fields going to the western states or the east coast, Midwest refineries will benefit due to proximity and an extensive railroad infrastructure.
Nimbley called the Toledo refinery its “crown jewel.” PBF operates two other refineries, one in Delaware and one nearby in New Jersey. The Toledo Refinery has a capacity of producing 170,000 barrels a day. Its products include gasoline, ultra-low sulfur diesel and petrochemicals nonene, xylene, tetramer and toluene.
Keep in mind Nimbley couched his optimism with the disclaimer about forward-looking statements. The game could change with unforeseen technological advances and a change in the political winds in Washington.