* U.S. refiner says crude exports would help economy
* Firm has benefited from lower cost of U.S. inland crudes
* CEO says overall benefit is key, believes in free trade
By David Sheppard
NEW YORK Dec 13 U.S.-based refiner Phillips 66
said Thursday it would support exports of crude oil from the
United States, arguing the boost they would give the country's
economy would trump the higher costs for the company and for
The share price of the second largest U.S. refiner has
soared by 56 percent since it was spun off by oil major
ConocoPhillips in May, partly because of the boom in North
American energy production.
Restrictive export rules, more production, and pipeline
bottlenecks have created a glut of lower-priced crude oil in the
U.S. Midwest. Refiners, including Phillips 66, have taken
advantage by moving this crude to their plants by rail, barge
"When you think about what is good for U.S. economy, what
drives job growth... all of these are reasons why we support
crude oil exports," Phillips 66 CEO Greg Garland told reporters
at a lunch in New York.
"If we're allowed to export refined products I think others
should be allowed to export the crude they produce."
Garland joins a growing movement in the energy industry that
seeks to increase energy exports from the United States, though
he is the first head of a major refiner to speak openly in favor
of the issue.
Exports of crude oil from the United States are generally
restricted, though some firms have started moving crude to
Canadian refineries and then re-import the products like
gasoline and diesel. The United States is a net importer of
Canadian crude, taking around 2 million barrels per day (bpd).
The United States in the past three years has become a major
exporter of gasoline, jet fuel, and diesel as domestic demand
has fallen in reaction to higher prices and a slow economic
Some say the decades old ban on crude oil exports is
outdated should North America become energy independent in the
coming years, though it is likely to be a fiercely fought
A U.S. government-sponsored report endorsed the expansion of
liquefied natural gas exports last week saying it would help the
overall economy, despite likely raising energy prices for
That report met with resistance from several large
industrial firms, including Dow Chemical, which has been
expanding U.S. operations in hopes of using cheap energy
supplies. U.S. natural gas prices are far currently less than a
third of those in Asia due to the shale gas boom.
Garland acknowledged the benefit U.S. manufacturers enjoy
from lower natural gas and oil prices brought about by the boom
in horizontal drilling and hydraulic fracturing - commonly
referred to as "fracking".
While he praised this cheap energy-led "renaissance" in
American manufacturing, he supports exporting crude.
"We consider ourselves a manufacturing company... Last year
the biggest export from the United States was not planes or
automobiles but refined products - and that's the first time
since the 1940s," Garland said.
Prices for gasoline and diesel in the United States are
still largely priced off of crude imports from overseas, despite
a sharp fall in prices of U.S. benchmark grades.
International marker Brent crude oil, which is the primary
influence on U.S. gasoline and diesel prices, traded around $108
a barrel on Thursday compared to $86 a barrel for the main U.S.
oil future, which is delivered into tank farms in Cushing,
NORTH AMERICAN ENERGY BOOM
Garland said that U.S. sea-borne crude oil imports could be
as low as 2 million barrels per day (bpd) within five years. The
drop in sea-borne imports, from a peak above 8 million bpd in
the middle of the last decade, has led many to speculate the
U.S. could eventually become a net exporter of crude.
Historically pipelines carried imported crude from the Gulf
Coast to refineries in the Midwest, but booming production from
Canadian tar sands and the Bakken shale oil fields in North
Dakota and Montana has left the central United States awash with
Phillips 66 has used thousands of rail cars and barges to
move lower-priced crude from the Midwest to its coastal
refineries, allowing it to lock in larger margins.
For example, Phillips 66 is running about 20,000 barrels
per day of oil from North Dakota's Bakken shale and other
cut-price crudes at Ferndale, Washington, plant and aims to
double that when a new offloading facility is built, Larry
Ziemba, executive vice president of refining, project
development and procurement, told investors on Thursday.
Phillips 66 announced plans for a master limited partnership
(MLP) on Thursday and said it would raise capital spending by 6
percent to $3.7 billion next year.
Shares were down by 2.45 percent at $51.75 at 3:00 p.m. EST
(2000 GMT). Traders and analysts said the MLP plan was smaller
than some had been anticipating.