|SA number of years ago, when we began to look at the
challenge facing U.S. refiners to produce ULSD, we speculated whether
refiners would de-sulfurize the easier projects first, leaving the more
challenging feedstocks to later as ULSD demand grew. But looking at individual refineries, that
does not seem to be the case.
|SThe first group of refineries on this chart have already
converted their total distillate pool to ULSD. The second group has converted almost all
of their diesel pool to ULSD, but is still producing some high sulfur
distillate. These facilities may not
do much more in the short term.
|SThe third and fourth groups of PADD 3 refiners above
produce still produce substantial LSD.
Moving to the higher ULSD production may be costly, but will likely be
no more challenging than projects experienced by some refiners already at
full ULSD production.
|SThus, we do not anticipate a huge hurdle in moving to full
ULSD. However, there still may be more
challenges further down the distribution chain. We have not yet tested the system’s ability
to handle large contamination issues, for example, particularly when diesel
product is in a region where large volumes of heating oil are not used.