Phillips 66 plans to spend $700 million more in 2015 than it did this year as it pushes forward with projects to build new pipelines, expand rail infrastructure and boost its capacity to process natural gas liquids to capitalize on the U.S. shale boom.
The Houston-based refining, pipeline and chemicals company said it will spend $4.6 billion next year, with more than two-thirds of that investment earmarked for boosting its midstream assets.
The 2015 capital budget, unveiled Friday, calls for the company to spend about 17 percent more than it expects to this year. The company originally set its 2014 budget at $2.7 billion but boosted that investment midyear to $3.9 billion.
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As U.S. oil production swells thanks to advances in hydraulic fracturing and horizontal drilling, Phillips 66 has been investing heavily in infrastructure to move hydrocarbons from the oil patch to its Gulf Coast refineries.
Most of the increased spending next year will go toward previously announced projects, including the ongoing construction of a new fractionator at its Sweeney refinery with the capacity to process 100,000 barrels per day of natural gas liquids, and a 4.4 million-barrel-per-month liquid petroleum gas export terminal in Freeport.
The fractionator, which will separate natural gas liquids into ethane, propane and butane, is expected to come online in the third quarter of 2015. The export terminal is expected to be operational in mid-2016.
The entire project is slated to cost $3 billion.
Phillips 66 said it will also allot cash to an array of pipeline and rail infrastructure projects to carry crude from the Bakken/Three Forks region in North Dakota to market centers throughout the U.S.
A smaller portion of the capital budget, about $1.1 billion, will be devoted to the refining sector, much of which will be spent on improving the reliability, maintenance, safety and environmental compliance of existing facilities. Phillips 66 may also consider “small, high-return, quick pay-out projects” to take advantage of cheap domestic crude and crank out more products, but the company provided no additional details.
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As crude prices have plunged, the company has capitalized on the improved margins between oil and the value of the gasoline, diesel and other products produced by the company’s 15 refineries.
“The 2015 capital program reflects our commitment to grow our higher-value businesses while enhancing returns in refining,” CEO Greg Garland said in a statement. “We are executing a portfolio of major midstream and chemicals projects while evaluating a significant backlog of investment opportunities.”
In addition to its $4.6 billion capital budget, Phillips 66 plans to spend $2.2 billion on joint venture projects, including a massive new ethane cracker and a polyethylene production unit under construction at the Baytown and Old Ocean plants run by Chevron Phillips Chemical, a partnership between Phillips 66 and Chevron.
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