NEW YORK, July 28 - BP (BP.L) said global refinery utilization rose to 93.6 percent in the second quarter of 2009 from the same quarter last year and the company expects rates to remain higher than they were in 2008 despite the challenges of low demand and high distillate stocks.
A faltering global economy has cut deeply into demand for gasoline and diesel fuel just as new refineries commissioned during the time of tight supply come on stream, adding to the overhang of oil products.
"For the first half of 2009, refining availability has been more than 4 percent higher than the same period last year and we expect availability to continue at higher levels than 2008 for the remainder of the year," said Byron Grote, BP's chief financial officer told analysts during the second-quarter earnings call.
The rise in utilization was helped by two of its large U.S. refineries. BP said its 475,000 barrel per day refinery in Texas City, Texas is making its full economic contribution for the first time since early 2005.
Last week, the company restarted a residual hydrotreating unit idled in 2005 after a fatal explosion in a gasoline-making unit in March shut down some units and back-to-back hurricanes later that year that cut rates further.
BP also returned its Whiting, Indiana refinery to service during the second quarter of 2009 after the largest turnaround in the history of the 405,000 barrel per day plant. The refinery is one of the largest suppliers of gasoline and diesel to the Chicago and other Midwestern U.S. markets.
During the conference call, BP said that demand for refined products was down in the first half from the same period in 2008. But it said it was encouraged by a slight uptick in demand in the second quarter from the first quarter.
"We are seeing a little more demand for gasoline coming back, and that is playing through into stock levels," said Ian Conn, the company's global head of refining.
Conn said market volumes for all refined products were down about 5 percent in both the second quarter and the first half of the year primarily due to falling business-to-business sales. But the company sees an uptick of volumes in business-to-consumer sales in the second quarter.
BP reported that global refining volumes for the second quarter were 2.269 million barrels per day compared with the 2.246 million barrels per day seen in the first quarter.
BP's average global refining margins continue to slip as product prices lagged rising crude prices.
Second quarter 2009 refinery profit margins were just under $5.00 a barrel compared with $8.19 last year. But now they are falling back to about $3.30.
"Indicator refining margins in the third quarter to date have been lower than in the second quarter and substantially below 2008 levels," the company said.
BP said the outlook remains challenging with high distillate inventories and continuing low demand.
One bright spot in a weak profit margin environment was in the U.S. Midwest, where margins at the Whiting refinery rose to $8.54 a barrel in the most recent quarter compared with the $6.53 last year.
BP is engaged in an expansion project at Whiting which allow it to process more Canadian heavy crude oil and increase motor fuel production by adding new sulfur recovery units and associated components as well as modifying existing parts of the plant.
"Whiting will turn the Midwest into a very advantaged position," said Conn.
A faltering global economy has cut deeply into demand for gasoline and diesel fuel just as new refineries commissioned during the time of tight supply come on stream, adding to the overhang of oil products.
"For the first half of 2009, refining availability has been more than 4 percent higher than the same period last year and we expect availability to continue at higher levels than 2008 for the remainder of the year," said Byron Grote, BP's chief financial officer told analysts during the second-quarter earnings call.
The rise in utilization was helped by two of its large U.S. refineries. BP said its 475,000 barrel per day refinery in Texas City, Texas is making its full economic contribution for the first time since early 2005.
Last week, the company restarted a residual hydrotreating unit idled in 2005 after a fatal explosion in a gasoline-making unit in March shut down some units and back-to-back hurricanes later that year that cut rates further.
BP also returned its Whiting, Indiana refinery to service during the second quarter of 2009 after the largest turnaround in the history of the 405,000 barrel per day plant. The refinery is one of the largest suppliers of gasoline and diesel to the Chicago and other Midwestern U.S. markets.
During the conference call, BP said that demand for refined products was down in the first half from the same period in 2008. But it said it was encouraged by a slight uptick in demand in the second quarter from the first quarter.
"We are seeing a little more demand for gasoline coming back, and that is playing through into stock levels," said Ian Conn, the company's global head of refining.
Conn said market volumes for all refined products were down about 5 percent in both the second quarter and the first half of the year primarily due to falling business-to-business sales. But the company sees an uptick of volumes in business-to-consumer sales in the second quarter.
BP reported that global refining volumes for the second quarter were 2.269 million barrels per day compared with the 2.246 million barrels per day seen in the first quarter.
BP's average global refining margins continue to slip as product prices lagged rising crude prices.
Second quarter 2009 refinery profit margins were just under $5.00 a barrel compared with $8.19 last year. But now they are falling back to about $3.30.
"Indicator refining margins in the third quarter to date have been lower than in the second quarter and substantially below 2008 levels," the company said.
BP said the outlook remains challenging with high distillate inventories and continuing low demand.
One bright spot in a weak profit margin environment was in the U.S. Midwest, where margins at the Whiting refinery rose to $8.54 a barrel in the most recent quarter compared with the $6.53 last year.
BP is engaged in an expansion project at Whiting which allow it to process more Canadian heavy crude oil and increase motor fuel production by adding new sulfur recovery units and associated components as well as modifying existing parts of the plant.
"Whiting will turn the Midwest into a very advantaged position," said Conn.
