HOUSTON, Sept 10 (Reuters) - Two Utah refiners that committed hundreds of millions of dollars on projects to run more Uinta Basin waxy crude are planning to tap other types as low oil prices prompted producers to focus on more profitable oilfields.
Tesoro Corp and HollyFrontier Corp announced upgrades to their Utah refineries in December 2011 and January 2012, respectively, as Uinta output was rising.
But oil prices down by 57 percent from mid-2014’s triple-digit highs prompted producers to hunker down in other oilfields with lower operation costs and better returns.
Newfield Exploration Co, the largest Uinta producer, ceased drilling in the Utah basin earlier this year to focus on the Anadarko Basin and other Oklahoma plays.
“We’ve ceased investment, as far as drilling investments, in the Uinta Basin,” Chief Executive Lee Boothby told analysts on Thursday during a webcast presentation at the Barclays CEO Energy-Power Conference in New York.
Bill Barrett Corp, another Uinta player, also has refocused efforts in the Niobrara shale in northeast Colorado.
CEO Scot Woodall said at the same conference on Thursday that the Uinta Basin is a vast resource that the company can exploit “if and when we come back to develop it.”
In the meantime, HollyFrontier and Tesoro are regrouping to tap other barrels as needed.
HollyFrontier’s expansion of its 31,000 barrels per day plant in Woods Cross, Utah, to 45,000 bpd will still be finished in the fourth quarter, the company said last week.
But the $400 million project to increase Uinta processing capacity to 25,000 bpd will cost up to another $30 million to add flexibility early next year for crude deliveries and naphtha and distillate production.
HollyFrontier can get Canadian barrels via Spectra Energy’s Express Pipeline and North Dakota Bakken and Wyoming barrels from other pipelines.
“We’re going to have the volumes,” Mike Wright, Woods Cross refinery manager, told analysts last week. “It may not be the original volumes that were planned two years ago because of the recent price decline.”
Tesoro also is gauging crude availability after its $275 million expansion of its 57,500 bpd Salt Lake City refinery to double Uinta crude processing capacity to 22,000 bpd was finished earlier this year.
Baker Hughes Inc says Utah has 4 drilling rigs, down from 23 a year ago. Two counties in the Uinta Basin account for 80.5 percent of the state’s oil output, according to the Utah Department of Natural Resources. (Reporting By Kristen Hays; Editing by Phil Berlowitz)