BP Gets OK to Refine Oil Sands Crude in Indiana

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The sixth-largest crude refinery in the US, in Whiting, Indiana, has the capacity to turn more than 400,000 barrels/day of crude into useful products like gasoline and jet fuel. BP plc (NYSE: BP) has spent more than $4 billion to renovate the plant in order to be able to process the heavy, sour crude oil from the Canadian oil sands. The company has now agreed to spend another $400 million to install equipment to reduce emissions of carbon, sulfur, and other pollutants.

The deal was struck with the US Environmental Protection Agency and the state of Indiana is expected to cut 90% of the refinery’s flaring-related emissions. A similar deal was struck between the EPA and Marathon Petroleum Corp. (NYSE: MPC) for six of the company’s refineries.

The capability to process the nastier oil sands crude should lower the cost of crude to BP and improving the company’s margins. Oil sands crude has been selling at a discount of as much as $20/barrel to WTI crude and even more to Brent crude.

The Whiting refinery is expected to start refining oil sands crude next year.

Paul Ausick