Marathon Petroleum To Invest $1.2B In Galveston STAR Project
Zacks Investment Research | Apr 02, 2019 11:16PM ET
Marathon Petroleum Corporation (NYSE:MPC) recently revealed plans to invest around $1.2 billion in its Galveston refinery, located on Galveston Bay of Texas, for the South Texas Asset Repositioning (“STAR”) program during the 2019-2022 period. The total cost of the project is estimated to be around $1.5 billion, lower than its previous projection of $2 billion.
Per the company, the STAR Program is on track for completion on schedule and well within budget. The project is expected to add 40,000 barrels per day of crude capacity at the Galveston refinery. Moreover, it is intended to integrate the company’s former Texas City refinery into the nearby Galveston Bay refinery, currently the second largest in the United States. It plans to increase the efficiency and reliability of the refinery via boosting residual oil processing capabilities, upgrading the crude unit and integrating facility logistics.
The STAR Program at the refinery is expected to reach completion by early-2022. Once the program comes online, it is expected to yield around $525 million in EBITDA per annum. Marathon Petroleum, through its subsidiary, selected Fluor Corporation (NYSE:FLR) for implementing the engineering and procurement work at the facility last year. Following the completion of the program, the Galveston Bay refinery is expected to achieve updated U.S. Environmental Protection agency Tier 3 gasoline sulfur standards.
Marathon Petroleum expects the internal rate of return from the project to be more than 40%. Moreover, the strategic positioning of the facility is commendable, as products from the facility can easily reach Florida, U.S. East coast, Eastern Mexico, making it a crucial export point. The refinery’s connectivity and exporting options can maximize refinery utilization. Additionally, the company is planning to participate in a Permian pipeline to supply crude to the refinery.
Price Performance
Marathon Petroleum has declined 17.4% in the past year compared with 6.9% collective fall of the stocks belonging to the Zacks Investment Research
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