Phillips 66 Puts Alliance Refinery Diesel Fuel Project on Hold

Phillips 66 (PSX) is holding off on starting a project that would boost ultra-low-sulfur diesel fuel output at its Alliance refinery in Louisiana.

The company received a permit on July 25 to expand a diesel hydrotreater and gulfining unit, according to a filing with the state’s Department of Environmental Quality. That would allow the units to remove more sulfur to meet emissions regulations. The permit will expire on Jan. 25, 2014.

Phillips 66 is “re-evaluating the timing of the project based on market economics,” Rich Johnson, a Houston-based company spokesman, said in an e-mailed statement. “Reviewing economics such as supply and demand forecasts for our product will be taken into consideration as part of the long-range planning cycle we use to determine what capital projects we want to invest in.”

Johnson declined to comment further on the project. Alliance can produce 120,000 barrels per day of heating oil, diesel and jet fuel, according to a company report.

The company has decided not to sell the refinery as it had considered earlier this year, Greg Garland, chief executive officer of Phillips 66, said in a second-quarter earnings conference call.

“There were a handful of offers and none of them we really regarded as approaching whole value for the asset,” Garland said in an earnings call with investors and analysts on Aug. 1.

The Alliance refinery can process as much as 247,000 barrels per day, according to data compiled by Bloomberg.