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Cover and table of contents
10-K 1 psx-20161231_10k.htm 10-K
| 2016 |
| UNITED STATES | ||
| SECURITIES AND EXCHANGE COMMISSION | ||
| Washington, D.C. 20549 | ||
| FORM 10-K |
| (Mark One) | ||
| [X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the fiscal year ended | December 31, 2016 | |
| OR | ||
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from | to | |||
| Commission file number: 001-35349 |
| Phillips 66 | ||
| (Exact name of registrant as specified in its charter) |
| Delaware | 45-3779385 | |||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 2331 CityWest Blvd., Houston, Texas 77042 | ||
| (Address of principal executive offices) (Zip Code) | ||
| Registrant’s telephone number, including area code: 281-293-6600 |
| Securities registered pursuant to Section 12(b) of the Act: | ||||
| Title of each class | Name of each exchange on which registered | |||
| Common Stock, $.01 Par Value | New York Stock Exchange |
| Securities registered pursuant to Section 12(g) of the Act: None | ||||
| Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. | [X] Yes [ ] No | |||
| Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. | [ ] Yes [X] No | |||
| Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | [X] Yes [ ] No | |||
| Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). | [X] Yes [ ] No | |||
| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. | [ ] | |||
| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. | ||||
| Large accelerated filer [X] | Accelerated filer [ ] | Non-accelerated filer [ ] | Smaller reporting company [ ] | |
| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). | [ ] Yes [X] No |
The aggregate market value of common stock held by non-affiliates of the registrant on June 30, 2016, the last business day of the registrant’s most recently completed second fiscal quarter, based on the closing price on that date of $79.34, was $41.5 billion. The registrant, solely for the purpose of this required presentation, had deemed its Board of Directors and executive officers to be affiliates, and deducted their stockholdings in determining the aggregate market value.
The registrant had 517,816,429 shares of common stock outstanding at January 31, 2017.
Documents incorporated by reference:
Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 3, 2017 (Part III).
Unless otherwise indicated, “the company,” “we,” “our,” “us” and “Phillips 66” are used in this report to refer to the businesses of Phillips 66 and its consolidated subsidiaries. Unless the context requires otherwise, references to “DCP Midstream” include the consolidated operations of DCP Midstream, LLC, including DCP Midstream, LP (formerly named DCP Midstream Partners, LP), the master limited partnership formed by DCP Midstream, LLC.
This Annual Report on Form 10-K contains forward-looking statements including, without limitation, statements relating to our plans, strategies, objectives, expectations and intentions that are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions identify forward-looking statements. The company does not undertake to update, revise or correct any forward-looking information unless required to do so under the federal securities laws. Readers are cautioned that such forward-looking statements should be read in conjunction with the company’s disclosures under the heading “CAUTIONARY STATEMENT FOR THE PURPOSES OF THE ‘SAFE HARBOR’ PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.”
PART I
Items 1 and 2. BUSINESS AND PROPERTIES
CORPORATE STRUCTURE
Phillips 66, headquartered in Houston, Texas, was incorporated in Delaware in 2011 in connection with, and in anticipation of, a restructuring of ConocoPhillips that separated its downstream businesses into an independent, publicly traded company named Phillips 66. The two companies were separated by ConocoPhillips distributing to its stockholders all the shares of common stock of Phillips 66 after the market closed on April 30, 2012 (the Separation). On May 1, 2012, Phillips 66 stock began trading “regular-way” on the New York Stock Exchange under the “PSX” stock symbol.
Our business is organized into four operating segments:
| 1) | Midstream—Gathers, processes, transports and markets natural gas; and transports, stores, fractionates and markets natural gas liquids (NGL) in the United States. In addition, this segment transports crude oil and other feedstocks to our refineries and other locations, delivers refined and specialty products to market, and provides terminaling and storage services for crude oil and petroleum products. The segment also stores, refrigerates and exports liquefied petroleum gas (LPG) primarily to Asia and Europe. The Midstream segment includes our master limited partnership, Phillips 66 Partners LP, as well as our 50 percent equity investment in DCP Midstream, LLC (DCP Midstream). |
| 2) | Chemicals—Consists of our 50 percent equity investment in Chevron Phillips Chemical Company LLC (CPChem), which manufactures and markets petrochemicals and plastics on a worldwide basis. |
| 3) | Refining—Buys, sells and refines crude oil and other feedstocks at 13 refineries, mainly in the United States and Europe. |
| 4) | Marketing and Specialties (M&S)—Purchases for resale and markets refined petroleum products (such as gasolines, distillates and aviation fuels), mainly in the United States and Europe. In addition, this segment includes the manufacturing and marketing of specialty products, as well as power generation operations. |
Corporate and Other includes general corporate overhead, interest expense, our investment in new technologies and various other corporate items. Corporate assets include all cash and cash equivalents.
At December 31, 2016, Phillips 66 had approximately 14,800 employees.
SEGMENT AND GEOGRAPHIC INFORMATION
For operating segment and geographic information, see Note 26—Segment Disclosures and Related Information, in the Notes to Consolidated Financial Statements, which is incorporated herein by reference.
MIDSTREAM
The Midstream segment consists of three business lines:
| • | Transportation—Transports crude oil and other feedstocks to our refineries and other locations, delivers refined and specialty products to market, and provides terminaling and storage services for crude oil and petroleum products. |
| • | DCP Midstream—Gathers, processes, transports and markets natural gas and transports, fractionates and markets NGL. |
| • | NGL—Transports, fractionates and markets natural gas liquids, as well as exports LPG at our Freeport terminal. |
Phillips 66 Partners LP
In 2013, we formed Phillips 66 Partners LP, a master limited partnership (MLP), to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum product and NGL pipelines and terminals, as well as other midstream assets. At December 31, 2016, we owned a 59 percent limited partner interest and a 2 percent general partner interest in Phillips 66 Partners, while the public owned a 39 percent limited partner interest.
Headquartered in Houston, Texas, Phillips 66 Partners’ assets and equity investments consist of crude oil, NGL and refined petroleum product pipelines, terminals, rail racks and storage systems, as well as an NGL fractionator, that are geographically dispersed throughout the United States. The majority of Phillips 66 Partners’ assets are integral to Phillips 66-operated refineries.
During 2016, Phillips 66 Partners expanded its business by acquiring from us:
| • | A 25 percent interest in our then wholly owned subsidiary, Phillips 66 Sweeny Frac LLC, which owns both the Sweeny Fractionator, an NGL fractionator located within our Sweeny Refinery complex in Old Ocean, Texas, and the Clemens Caverns, an NGL salt dome storage facility located near Brazoria, Texas. This acquisition closed in March 2016. |
| • | The remaining 75 percent interest in Phillips 66 Sweeny Frac LLC and a 100 percent interest in our then wholly owned subsidiary, Phillips 66 Plymouth LLC, which owned Standish Pipeline, a refined petroleum product pipeline system extending from Phillips 66’s Ponca City Refinery in Ponca City, Oklahoma, and terminating at Phillips 66 Partners’ North Wichita Terminal in Wichita, Kansas. This acquisition closed in May 2016. |
| • | A large number of crude oil, refined product and NGL pipeline and terminal assets supporting the Billings, Ponca City, Bayway and Borger refineries. This acquisition, Phillips 66 Partners’ largest to date, closed in October 2016. |
During 2016, Phillips 66 Partners expanded its business through the following transactions with third parties:
| • | During the third quarter of 2016, Phillips 66 Partners acquired an additional 2.5 percent equity interest in the Explorer Pipeline Company (Explorer), resulting in total ownership of approximately 22 percent. Explorer is a 1,830-mile pipeline that transports gasoline, diesel, fuel oil, and jet fuel to more than 70 major cities in 16 states. |
| • | During the third quarter of 2016, Phillips 66 Partners and Plains All American Pipeline, L.P. (Plains) formed STACK Pipeline LLC (STACK JV), a 50/50 limited liability company that owns and operates a common carrier pipeline that transports crude oil from the Sooner Trend, Anadarko Basin, Canadian and Kingfisher counties play in northwestern Oklahoma to Cushing, Oklahoma. The crude oil pipeline is approximately 54 miles long with a |
current capacity of approximately 100,000 barrels per day, with plans to expand the pipeline through a variety of growth opportunities.
| • | During the fourth quarter of 2016, Phillips 66 Partners acquired an NGL logistics system (River Parish) in southeast Louisiana. The acquisition included 1.5 million barrels of storage and an approximate 300-mile, bidirectional NGL pipeline system connected to third-party fractionators, refineries and a petrochemical plant, as well as our Alliance Refinery. The acquisition also included approximately 200 miles of regulated pipelines that transport raw NGL from third-party natural gas processing plants to pipeline and fractionation infrastructure. |
The operations and financial results of Phillips 66 Partners are included in Midstream’s Transportation and NGL business lines, based on the nature of the activity within the partnership.
Transportation
We own or lease various assets to provide terminaling and storage of crude oil, refined products, natural gas and NGL. These assets include pipeline systems; petroleum product, crude oil and LPG terminals; a petroleum coke handling facility; marine vessels; railcars and trucks.
Pipelines and Terminals
At December 31, 2016, our Transportation business managed over 18,000 miles of crude oil, natural gas, NGL and petroleum products pipeline systems in the United States, including those partially owned or operated by affiliates. We owned or operated 40 finished product terminals, 38 storage locations, 5 LPG terminals, 17 crude oil terminals and 1 petroleum coke exporting facility.
During 2016, we continued to invest in our Beaumont Terminal in Nederland, Texas, the largest terminal in the Phillips 66 portfolio, which currently has 5.9 million barrels of crude oil storage capacity and 2.4 million barrels of refined product storage capacity. During 2016, we added 1.2 million barrels of crude storage capacity. Additionally, as of December 31, 2016, we had 800,000 barrels of incremental crude storage capacity under construction to be commissioned in the first quarter of 2017 and 1.2 million barrels of additional products storage expected to be available by mid-2017. In addition, we have initiated a variety of other projects aimed at increasing storage and throughput capabilities as we continue the expansion of the Beaumont terminal from its current 8.3 million barrels of storage capacity to 16 million barrels.
Construction progressed in 2016 on two crude oil pipeline systems being developed by our joint ventures, Dakota Access LLC (DAPL) and Energy Transfer Crude Oil Company, LLC (ETCOP). Phillips 66 owns a 25 percent interest in each joint venture, with Energy Transfer Partners, L.P. (ETP), one of our co-venturers, acting as the operator of both the DAPL and ETCOP pipeline systems. The DAPL pipeline is expected to deliver 470,000 barrels per day of crude oil from the Bakken/Three Forks production area in North Dakota to market centers in the Midwest. The DAPL pipeline will provide shippers with access to Midwestern refineries, unit-train rail loading facilities to facilitate deliveries to East Coast refineries, and the Gulf Coast market through an interconnection with the ETCOP pipeline in Patoka, Illinois. While DAPL awaited the issuance of an easement from the U.S. Army Corps of Engineers to complete work beneath the Missouri River, construction was completed on the remaining segments of the pipeline. The easement was granted on February 8, 2017, and construction of the pipeline under the river resumed. ETCOP, which is complete and ready for commissioning, will transport crude oil from the Midwest to the Sunoco Logistics Partners L.P. (Sunoco Logistics) and Phillips 66 storage terminals located in Nederland, Texas. The pipelines are expected to be operational in the first half of 2017.
In the second quarter of 2016, the Bayou Bridge Pipeline joint venture began delivering crude oil from Nederland, Texas, to Lake Charles, Louisiana. Phillips 66 Partners has a 40 percent equity interest in the joint venture, while ETP and Sunoco Logistics each hold a 30 percent interest, with Sunoco Logistics serving as the operator. The remaining section of the pipeline, which is being constructed by ETP, will deliver crude oil from Lake Charles to St. James, Louisiana, and is scheduled for completion in the second half of 2017.
In the fourth quarter of 2016, the 91-mile Sacagawea Pipeline was placed in service. The pipeline receives crude oil from areas in Dunn County and McKenzie County, North Dakota, and delivers crude oil to terminals and pipelines located in Stanley, North Dakota, including the 100,000 barrel per day Palermo Rail Terminal. The Palermo Rail Terminal is a
Phillips 66 Partners joint venture crude terminal that started operations in the fourth quarter of 2015. The Sacagawea Pipeline is owned by the joint venture Sacagawea Pipeline Company, LLC, of which Paradigm Pipeline LLC holds a 99 percent interest. Phillips 66 Partners and Paradigm Energy Partners, LLC each own a 50 percent interest in Paradigm Pipeline LLC.
The following table depicts our ownership interest in major pipeline systems as of December 31, 2016:
| Name | Origination/Terminus | Interest | Size | Length(Miles) | Gross Capacity (MBD) | ||||||||
| Crude and Feedstocks | |||||||||||||
| Bayou Bridge | Nederland, TX/Lake Charles, LA | 40 | % | 30” | 49 | 480 | |||||||
| Clifton Ridge † | Clifton Ridge, LA/Westlake, LA | 100 | 20” | 10 | 260 | ||||||||
| Cushing † | Cushing, OK/Ponca City, OK | 100 | 18” | 62 | 130 | ||||||||
| Eagle Ford Gathering † | Helena, TX | 100 | 6” | 6 | 20 | ||||||||
| Eagle Ford Gathering † | Tilden, TX/Whitsett, TX | 100 | 6”, 10” | 22 | 34 | ||||||||
| Glacier † | Cut Bank, MT/Billings, MT | 79 | 8”-12” | 865 | 126 | ||||||||
| Line O † | Cushing, OK/Borger, TX | 100 | 10” | 276 | 37 | ||||||||
| Line 80 † | Gaines, TX/Borger, TX | 100 | 8”, 12” | 237 | 28 | ||||||||
| Line 100 | Taft, CA/Lost Hills, CA | 100 | 8”, 10”, 12” | 79 | 54 | ||||||||
| Line 200 | Lost Hills, CA/Rodeo, CA | 100 | 12”, 16” | 228 | 93 | ||||||||
| Line 300 | Nipomo, CA/Arroyo Grande, CA | 100 | 8”, 10”, 12” | 69 | 48 | ||||||||
| Line 400 | Arroyo Grande, CA/Lost Hills, CA | 100 | 8”, 10”, 12” | 147 | 40 | ||||||||
| Louisiana Crude Gathering | Rayne, LA/Westlake, LA | 100 | 4”-8” | 80 | 25 | ||||||||
| North Texas Crude † | Wichita Falls, TX | 100 | 2”-16” | 224 | 28 | ||||||||
| Oklahoma Mainline † | Wichita Falls, TX/Ponca City, OK | 100 | 12” | 217 | 100 | ||||||||
| Sacagawea † | Keene, ND/Stanley, ND | 50 | 16” | 91 | 115 | ||||||||
| STACK PL † | Cashion, OK/Cushing, OK | 50 | 10”, 12” | 54 | 100 | ||||||||
| Sweeny Crude | Sweeny, TX/Freeport, TX | 100 | 12”, 24”, 30” | 56 | 265 | ||||||||
| WA Line † | Odessa, TX/Borger, TX | 100 | 12”, 14” | 289 | 104 | ||||||||
| West Texas Gathering † | Permian Basin | 100 | 4”-14” | 757 | 115 | ||||||||
| Petroleum Products | |||||||||||||
| ATA Line † | Amarillo, TX/Albuquerque, NM | 50 | 6”, 10” | 293 | 34 | ||||||||
| Borger to Amarillo † | Borger, TX/Amarillo, TX | 100 | 8”, 10” | 93 | 76 | ||||||||
| Borger-Denver | McKee, TX/Denver, CO | 70 | 6”-12” | 405 | 38 | ||||||||
| Cherokee East † | Medford, OK/Mount Vernon, MO | 100 | 10”, 12” | 287 | 55 | ||||||||
| Cherokee North † | Ponca City, OK/Arkansas City, KS | 100 | 10” | 29 | 57 | ||||||||
| Cherokee South † | Ponca City, OK/Oklahoma City, OK | 100 | 8” | 90 | 46 | ||||||||
| Cross Channel Connector † | Pasadena, TX/Galena Park, TX | 100 | 20” | 5 | 180 | ||||||||
| Explorer † | Texas Gulf Coast/Chicago, IL | 22 | 24”, 28” | 1,830 | 660 | ||||||||
| Gold Line † | Borger, TX/East St. Louis, IL | 100 | 8”-16” | 681 | 120 | ||||||||
| Harbor | Woodbury, NJ/Linden, NJ | 33 | 16” | 80 | 171 | ||||||||
| Heartland* | McPherson, KS/Des Moines, IA | 50 | 8”, 6” | 49 | 30 | ||||||||
| LAX Jet Line | Wilmington, CA/Los Angeles, CA | 50 | 8” | 19 | 50 | ||||||||
| Los Angeles Products | Torrance, CA/Los Angeles, CA | 100 | 6”, 12” | 22 | 112 | ||||||||
| Paola Products † | Paola, KS/Kansas City, KS | 100 | 8”, 10” | 106 | 96 | ||||||||
| Pioneer | Sinclair, WY/Salt Lake City, UT | 50 | 8”, 12” | 562 | 63 | ||||||||
| Richmond | Rodeo, CA/Richmond, CA | 100 | 6” | 14 | 26 | ||||||||
| SAAL † | Amarillo, TX/Abernathy, TX | 33 | 6” | 102 | 33 | ||||||||
| SAAL † | Abernathy, TX/Lubbock, TX | 54 | 6” | 19 | 30 | ||||||||
| Seminoe † | Billings, MT/Sinclair, WY | 100 | 6”-10” | 342 | 33 | ||||||||
| Standish † | Marland Junction, OK/Wichita, KS | 100 | 18” | 92 | 72 | ||||||||
| Sweeny to Pasadena † | Sweeny, TX/Pasadena, TX | 100 | 12”, 18” | 120 | 294 | ||||||||
| Torrance Products | Wilmington, CA/Torrance, CA | 100 | 10”, 12” | 8 | 161 | ||||||||
| Watson Products Line | Wilmington, CA/Long Beach, CA | 100 | 20” | 9 | 238 | ||||||||
| Yellowstone | Billings, MT/Moses Lake, WA | 46 | 6”-10” | 710 | 66 |
| Name | Origination/Terminus | Interest | Size | Length (Miles) | Gross Capacity (MBD) | ||||||||
| NGL | |||||||||||||
| Chisholm | Kingfisher, OK/Conway, KS | 50 | % | 4”-10” | 202 | 42 | |||||||
| Powder River | Sage Creek, WY/Borger, TX | 100 | 6”-8” | 705 | 14 | ||||||||
| River Parish NGL † | Southeast Louisiana | 100 | 4”-20” | 510 | 117 | ||||||||
| Sand Hills**† | Permian Basin/Mont Belvieu, TX | 33 | 20” | 1,150 | 280 | ||||||||
| Skelly-Belvieu | Skellytown, TX/Mont Belvieu, TX | 50 | 8” | 571 | 45 | ||||||||
| Southern Hills**† | U.S. Midcontinent/Mont Belvieu, TX | 33 | 20” | 941 | 140 | ||||||||
| Sweeny NGL | Brazoria, TX/Sweeny, TX | 100 | 20” | 18 | 204 | ||||||||
| TX Panhandle Y1/Y2 | Sher-Han, TX/Borger, TX | 100 | 3”-10” | 299 | 61 | ||||||||
| LPG | |||||||||||||
| Blue Line | Borger, TX/East St. Louis, IL | 100 | 8”-12” | 688 | 29 | ||||||||
| Brown Line † | Ponca City, OK/Wichita, KS | 100 | 8”, 10” | 76 | 26 | ||||||||
| Conway to Wichita | Conway, KS/Wichita, KS | 100 | 12” | 55 | 38 | ||||||||
| Medford † | Ponca City, OK/Medford, OK | 100 | 4”-6” | 42 | 10 | ||||||||
| Sweeny LPG Lines | Sweeny, TX/Mont Belvieu & Freeport, TX | 100 | 10”-20” | 246 | 842 | ||||||||
| Natural Gas | |||||||||||||
| Rockies Express | Meeker, CO/Clarington, OH | 25 | 36”-42” | 1,712 | 1.8 BCFD |
†Owned by Phillips 66 Partners LP; Phillips 66 held a 61 percent ownership interest in Phillips 66 Partners LP at December 31, 2016.
*Total pipeline system is 419 miles. Phillips 66 has ownership interest in multiple segments totaling 49 miles.
**Operated by DCP Midstream Partners, LP; Phillips 66 Partners holds a direct one-third ownership in the pipeline entities.
The following table depicts our ownership interest in finished product terminals as of December 31, 2016:
| Facility Name | Location | Interest | Gross Storage Capacity (MBbl) | Gross Rack Capacity (MBD) | |||||||
| Albuquerque † | New Mexico | 100 | % | 244 | 18 | ||||||
| Amarillo † | Texas | 100 | 277 | 29 | |||||||
| Beaumont | Texas | 100 | 2,400 | 8 | |||||||
| Billings | Montana | 100 | 88 | 16 | |||||||
| Bozeman | Montana | 100 | 113 | 13 | |||||||
| Casper † | Montana | 100 | 365 | 7 | |||||||
| Colton | California | 100 | 211 | 21 | |||||||
| Denver | Colorado | 100 | 310 | 43 | |||||||
| Des Moines | Iowa | 50 | 206 | 15 | |||||||
| East St. Louis † | Illinois | 100 | 2,085 | 78 | |||||||
| Glenpool † | Oklahoma | 100 | 627 | 19 | |||||||
| Great Falls | Montana | 100 | 198 | 12 | |||||||
| Hartford † | Illinois | 100 | 1,075 | 25 | |||||||
| Helena | Montana | 100 | 178 | 10 | |||||||
| Jefferson City † | Missouri | 100 | 110 | 16 | |||||||
| Kansas City † | Kansas | 100 | 1,294 | 66 | |||||||
| La Junta | Colorado | 100 | 101 | 10 | |||||||
| Lincoln | Nebraska | 100 | 219 | 21 | |||||||
| Linden † | New Jersey | 100 | 429 | 121 | |||||||
| Los Angeles | California | 100 | 116 | 75 | |||||||
| Lubbock † | Texas | 100 | 179 | 17 | |||||||
| Missoula | Montana | 50 | 368 | 29 | |||||||
| Moses Lake | Washington | 50 | 186 | 13 | |||||||
| Mount Vernon † | Missouri | 100 | 363 | 46 | |||||||
| North Salt Lake | Utah | 50 | 738 | 41 | |||||||
| Oklahoma City † | Oklahoma | 100 | 352 | 48 | |||||||
| Pasadena † | Texas | 100 | 3,210 | 65 | |||||||
| Ponca City † | Oklahoma | 100 | 51 | 23 | |||||||
| Portland | Oregon | 100 | 664 | 33 | |||||||
| Renton | Washington | 100 | 228 | 20 | |||||||
| Richmond | California | 100 | 334 | 28 | |||||||
| Rock Springs | Wyoming | 100 | 125 | 19 | |||||||
| Sacramento | California | 100 | 141 | 13 | |||||||
| Sheridan † | Wyoming | 100 | 86 | 15 | |||||||
| Spokane | Washington | 100 | 351 | 24 | |||||||
| Tacoma | Washington | 100 | 307 | 17 | |||||||
| Tremley Point † | New Jersey | 100 | 1,593 | 39 | |||||||
| Westlake | Louisiana | 100 | 128 | 16 | |||||||
| Wichita Falls | Texas | 100 | 303 | 15 | |||||||
| Wichita North † | Kansas | 100 | 679 | 19 |
†Owned by Phillips 66 Partners LP; Phillips 66 held a 61 percent ownership interest in Phillips 66 Partners LP at December 31, 2016.
The following table depicts our ownership interest in crude and other terminals as of December 31, 2016:
| Facility Name | Location | Interest | Gross Storage Capacity (MBbl) | Gross Loading Capacity* | |||||||
| Crude | |||||||||||
| Beaumont | Texas | 100 | % | 5,904 | N/A | ||||||
| Billings † | Montana | 100 | 270 | N/A | |||||||
| Borger | Texas | 100 | 721 | N/A | |||||||
| Clifton Ridge † | Louisiana | 100 | 3,410 | N/A | |||||||
| Cushing † | Oklahoma | 100 | 700 | N/A | |||||||
| Freeport | Texas | 100 | 2,200 | N/A | |||||||
| Junction | California | 100 | 523 | N/A | |||||||
| McKittrick | California | 100 | 237 | N/A | |||||||
| Odessa | Texas | 100 | 523 | N/A | |||||||
| Palermo † | North Dakota | 70 | 206 | N/A | |||||||
| Pecan Grove † | Louisiana | 100 | 142 | N/A | |||||||
| Ponca City † | Oklahoma | 100 | 1,200 | N/A | |||||||
| Santa Margarita | California | 100 | 335 | N/A | |||||||
| Santa Maria | California | 100 | 112 | N/A | |||||||
| Tepetate | Louisiana | 100 | 152 | N/A | |||||||
| Torrance | California | 100 | 309 | N/A | |||||||
| Wichita Falls | Texas | 100 | 240 | N/A | |||||||
| Petroleum Coke | |||||||||||
| Lake Charles | Louisiana | 50 | N/A | N/A | |||||||
| Rail | |||||||||||
| Bayway † | New Jersey | 100 | N/A | 75 | |||||||
| Beaumont | Texas | 100 | N/A | 20 | |||||||
| Ferndale † | Washington | 100 | N/A | 30 | |||||||
| Missoula | Montana | 50 | N/A | 41 | |||||||
| Palermo † | North Dakota | 70 | N/A | 100 | |||||||
| Thompson Falls | Montana | 50 | N/A | 42 | |||||||
| Marine | |||||||||||
| Beaumont | Texas | 100 | N/A | 17 | |||||||
| Clifton Ridge † | Louisiana | 100 | N/A | 48 | |||||||
| Hartford † | Illinois | 100 | N/A | 3 | |||||||
| Pecan Grove † | Louisiana | 100 | N/A | 6 | |||||||
| Portland | Oregon | 100 | N/A | 10 | |||||||
| Richmond | California | 100 | N/A | 3 | |||||||
| Tacoma | Washington | 100 | N/A | 12 | |||||||
| Tremley Point † | New Jersey | 100 | N/A | 7 | |||||||
| NGL Facilities | |||||||||||
| Freeport | Texas | 100 | 1,000 | 36 | |||||||
| River Parish † | Louisiana | 100 | 1,500 | N/A | |||||||
| Clemens † | Texas | 100 | 7,500 | N/A |
†Owned by Phillips 66 Partners LP; Phillips 66 held a 61 percent ownership interest in Phillips 66 Partners LP at December 31, 2016.
*Rail in thousands of barrels daily (MBD); Marine and NGL Facilities in thousands of barrels per hour.
Rockies Express Pipeline LLC (REX)
We have a 25 percent interest in REX. The REX natural gas pipeline runs 1,712 miles from Meeker, Colorado, to Clarington, Ohio, and has a natural gas transmission capacity of 1.8 billion cubic feet per day (BCFD), with most of its system having a pipeline diameter of 42 inches. Numerous compression facilities support the pipeline system. The REX pipeline was originally designed to enable natural gas producers in the Rocky Mountain region to deliver natural gas supplies to the Midwest and eastern regions of the United States. During 2015, as a result of east-to-west expansion projects, the REX Pipeline began transporting natural gas supplies from the Appalachian Basin to Midwest markets. In the fourth quarter of 2016, as a result of capacity enhancement projects, the east-to-west capacity was increased to 2.6 BCFD in order to deliver additional natural gas into Midwestern gas markets.
Marine Vessels
At December 31, 2016, we had 13 double-hulled, international-flagged crude oil and product tankers under term charter, with capacities ranging in size from 300,000 to 1,100,000 barrels. Additionally, we had under term charter two Jones Act-compliant tankers and 50 tug/barge units. These vessels are used primarily to transport feedstocks or provide product transportation for certain of our refineries, including delivery of domestic crude oil to our Gulf Coast and East Coast refineries.
Truck and Rail
Truck and rail operations support our feedstock and distribution operations. Rail movements are provided via a fleet of more than 10,800 owned and leased railcars. Truck movements are provided through approximately 150 third-party trucking companies, as well as through Sentinel Transportation LLC, which became a wholly owned subsidiary on December 31, 2016.
DCP Midstream
Our Midstream segment includes our 50 percent equity investment in DCP Midstream, which is headquartered in Denver, Colorado. As of December 31, 2016, DCP Midstream owned or operated 61 natural gas processing facilities, with a net processing capacity of approximately 8.0 BCFD. DCP Midstream’s owned or operated natural gas pipeline systems included gathering services for these facilities, as well as natural gas transmission, and totaled approximately 64,000 miles of pipeline. DCP Midstream also owned or operated 12 NGL fractionation plants, along with natural gas and NGL storage facilities, a propane wholesale marketing business and NGL pipeline assets.
The residual natural gas, primarily methane, which results from processing raw natural gas, is sold by DCP Midstream at market-based prices to marketers and end users, including large industrial companies, natural gas distribution companies and electric utilities. DCP Midstream purchases or takes custody of substantially all of its raw natural gas from producers, principally under contractual arrangements that expose DCP Midstream to the prices of NGL, natural gas and condensate. DCP Midstream also has fee-based arrangements with producers to provide midstream services such as gathering and processing.
DCP Midstream markets a portion of its NGL to us and CPChem under existing 15-year contracts, the primary commitment of which began a ratable wind-down period in December 2014 and expires in January 2019. These purchase commitments are on an “if-produced, will-purchase” basis.
During 2016, DCP Midstream completed or advanced the following growth projects:
| • | The Sand Hills pipeline mainline capacity expansion was placed into service during the second quarter of 2016. |
| • | In the first quarter of 2016, DCP Partners (defined below) began to participate in earnings for its 15 percent interest in the Panola intrastate NGL pipeline which completed an expansion in the third quarter of 2016. |
| • | Also in the first quarter of 2016, construction was completed on the Grand Parkway gathering system in the Denver-Julesburg (DJ) Basin. |
Effective January 1, 2017, DCP Midstream, LLC and its master limited partnership (then named DCP Midstream Partners, LP, subsequently renamed DCP Midstream, LP on January 11, 2017, and referred to herein as DCP Partners) closed a transaction in which DCP Midstream, LLC contributed subsidiaries owning all of its operating assets and its existing debt to DCP Partners, in exchange for approximately 31.1 million DCP Partners units. Following the transaction, we and our co-venturer retained our 50/50 investment in DCP Midstream, LLC and DCP Midstream, LLC retained its incentive distribution rights in DCP Partners, through its ownership of the general partner of DCP Partners, and held a 38 percent interest in DCP Partners. See the “Equity Affiliates” section of “Significant Sources of Capital” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information on this transaction.
NGL
Our NGL business includes the following:
| • | A U.S. Gulf Coast NGL market hub comprising the Freeport LPG Export Terminal and Phillips 66 Partners’ 100,000 barrels-per-day (BPD) Sweeny Fractionator. These assets are supported by Phillips 66 Partners’ 7.5-million-barrel Clemens storage facility. |
| • | A 22.5 percent equity interest in Gulf Coast Fractionators, which owns an NGL fractionation plant in Mont Belvieu, Texas. We operate the facility, and our net share of its capacity is 32,625 BPD. |
| • | A 12.5 percent equity interest in a fractionation plant in Mont Belvieu, Texas. Our net share of its capacity is 30,250 BPD. |
| • | A 40 percent interest in a fractionation plant in Conway, Kansas. Our net share of its capacity is 43,200 BPD. |
| • | Phillips 66 Partners owns an NGL logistics system in southeast Louisiana comprising approximately 500 miles of pipelines and a storage cavern connecting multiple fractionation facilities, refineries and a petrochemical facility. |
| • | Phillips 66 Partners owns a direct one-third interest in both Sand Hills and Southern Hills pipelines, which connect Eagle Ford, Permian and Midcontinent production to the Mont Belvieu, Texas market. |
The Sweeny Fractionator is located adjacent to our Sweeny Refinery in Old Ocean, Texas and supplies purity ethane to the petrochemical industry and LPG to domestic and global markets. Raw NGL supply to the fractionator is delivered from nearby major pipelines, including the Sand Hills pipeline. The fractionator is supported by significant infrastructure including connectivity to two NGL supply pipelines, a 180,000 BPD pipeline connecting to the Mont Belvieu market center and a multi-million barrel salt dome storage facility with access to our LPG export terminal in Freeport, Texas.
In December 2016, the Freeport LPG Export Terminal became fully operational and loaded its first cargos. The terminal leverages our fractionation, transportation and storage infrastructure to supply petrochemical, heating and transportation markets globally. The terminal can simultaneously load two ships with refrigerated propane and butane at a combined rate of 36,000 barrels per hour. In support of the terminal, a 100,000 BPD unit to upgrade domestic propane for export was installed near the Sweeny Fractionator. In addition, the terminal exports 10,000 to 15,000 BPD of natural gasoline (C5+) produced at the Sweeny Fractionator.
CHEMICALS
The Chemicals segment consists of our 50 percent equity investment in CPChem, which is headquartered in The Woodlands, Texas. At the end of 2016, CPChem owned or had joint-venture interests in 32 global manufacturing facilities and two U.S. research and development centers.
We structure our reporting of CPChem’s operations around two primary business segments: Olefins and Polyolefins (O&P) and Specialties, Aromatics and Styrenics (SA&S). The O&P business segment produces and markets ethylene and other olefin products; the ethylene produced is primarily consumed within CPChem for the production of polyethylene, normal alpha olefins and polyethylene pipe. The SA&S business segment manufactures and markets aromatics and styrenics products, such as benzene, styrene, paraxylene and cyclohexane, as well as polystyrene and styrene-butadiene copolymers. SA&S also manufactures and/or markets a variety of specialty chemical products including organosulfur chemicals, solvents, catalysts, drilling chemicals and mining chemicals.
The manufacturing of petrochemicals and plastics involves the conversion of hydrocarbon-based raw material feedstocks into higher-value products, often through a thermal process referred to in the industry as “cracking.” For example, ethylene can be produced from cracking the feedstocks ethane, propane, butane, natural gasoline or certain refinery liquids, such as naphtha and gas oil. The produced ethylene has a number of uses, primarily as a raw material for the production of plastics, such as polyethylene and polyvinyl chloride. Plastic resins, such as polyethylene, are
manufactured in a thermal/catalyst process, and the produced output is used as a further raw material for various applications, such as packaging and plastic pipe.
CPChem and its equity affiliates have manufacturing facilities located in Belgium, China, Colombia, Qatar, Saudi Arabia, Singapore, South Korea and the United States.
The following table reflects CPChem’s petrochemicals and plastics product capacities at December 31, 2016:
| Millions of Pounds per Year | |||||
| U.S. | Worldwide | ||||
| O&P | |||||
| Ethylene | 8,030 | 10,505 | |||
| Propylene | 2,675 | 3,180 | |||
| High-density polyethylene | 4,205 | 6,500 | |||
| Low-density polyethylene | 620 | 620 | |||
| Linear low-density polyethylene | 490 | 490 | |||
| Polypropylene | — | 310 | |||
| Normal alpha olefins | 2,335 | 2,850 | |||
| Polyalphaolefins | 105 | 235 | |||
| Polyethylene pipe | 590 | 590 | |||
| Total O&P | 19,050 | 25,280 | |||
| SA&S | |||||
| Benzene | 1,600 | 2,530 | |||
| Cyclohexane | 1,060 | 1,455 | |||
| Paraxylene | 1,000 | 1,000 | |||
| Styrene | 1,050 | 1,875 | |||
| Polystyrene | 835 | 1,070 | |||
| K-Resin® SBC | — | 70 | |||
| Specialty chemicals | 439 | 559 | |||
| Nylon 6,6 | — | 55 | |||
| Nylon compounding | — | 20 | |||
| Polymer conversion | — | 130 | |||
| Total SA&S | 5,984 | 8,764 | |||
| Total O&P and SA&S | 25,034 | 34,044 |
Capacities include CPChem’s share in equity affiliates and excludes CPChem’s NGL fractionation capacity.
In 2016, CPChem continued construction of a world-scale ethane cracker and polyethylene facilities in the U.S. Gulf Coast region. The project will leverage the development of the significant shale resources in the United States. CPChem’s Cedar Bayou facility, in Baytown, Texas, is the location of the 3.3 billion-pound-per-year ethylene unit. The polyethylene facility will have two polyethylene units, each with an annual capacity of 1.1 billion pounds, and is located near CPChem’s Sweeny facility in Old Ocean, Texas. The project is expected to be completed in 2017.
In March 2016, CPChem approved expansion of the polyalphaolefins (PAO) capacity at its Cedar Bayou plant by 22 million pounds per year, or 20 percent. The expansion will allow CPChem to meet the increasing demand for high-performance lubricants. Feedstocks for this project will be provided through expansion completed in 2015 of normal alpha olefins capacity at its Cedar Bayou facility. The PAO expansion is expected to start up by mid-2017.
In the third quarter of 2016, CPChem completed construction of a polyethylene pilot plant at its research and technology facility in Bartlesville, Oklahoma. The pilot plant enables polyethylene research, such as new catalyst and polymer development, to take place on a pilot scale prior to implementation in full-scale operations.
In October 2016, CPChem entered into an agreement to sell its K-Resin® styrene-butadiene copolymers business, with the sale expected to close in the first half of 2017.
REFINING
Our Refining segment buys, sells, and refines crude oil and other feedstocks into petroleum products (such as gasolines, distillates and aviation fuels) at 13 refineries, mainly in the United States and Europe.
The table below depicts information for each of our U.S. and international refineries at December 31, 2016:
| Thousands of Barrels Daily | |||||||||||||||||||
| Region/Refinery | Location | Interest | Net Crude Throughput Capacity | Net Clean Product Capacity** | Clean Product Yield Capability | ||||||||||||||
| At December 31 2016 | Effective January 1 2017 | Gasolines | Distillates | ||||||||||||||||
| Atlantic Basin/Europe | |||||||||||||||||||
| Bayway | Linden, NJ | 100.00 | % | 238 | 241 | 150 | 120 | 92 | % | ||||||||||
| Humber | N. Lincolnshire, United Kingdom | 100.00 | 221 | 221 | 90 | 115 | 81 | ||||||||||||
| MiRO* | Karlsruhe, Germany | 18.75 | 58 | 58 | 25 | 25 | 87 | ||||||||||||
| 517 | 520 | ||||||||||||||||||
| Gulf Coast | |||||||||||||||||||
| Alliance | Belle Chasse, LA | 100.00 | 247 | 247 | 125 | 120 | 88 | ||||||||||||
| Lake Charles | Westlake, LA | 100.00 | 249 | 249 | 90 | 115 | 70 | ||||||||||||
| Sweeny | Old Ocean, TX | 100.00 | 247 | 247 | 135 | 120 | 87 | ||||||||||||
| 743 | 743 | ||||||||||||||||||
| Central Corridor | |||||||||||||||||||
| Wood River | Roxana, IL | 50.00 | 157 | 157 | 80 | 55 | 81 | ||||||||||||
| Borger | Borger, TX | 50.00 | 73 | 73 | 50 | 25 | 91 | ||||||||||||
| Ponca City | Ponca City, OK | 100.00 | 203 | 203 | 120 | 95 | 93 | ||||||||||||
| Billings | Billings, MT | 100.00 | 60 | 60 | 35 | 25 | 90 | ||||||||||||
| 493 | 493 | ||||||||||||||||||
| West Coast | |||||||||||||||||||
| Ferndale | Ferndale, WA | 100.00 | 101 | 101 | 60 | 30 | 81 | ||||||||||||
| Los Angeles | Carson/ Wilmington, CA | 100.00 | 139 | 139 | 85 | 65 | 90 | ||||||||||||
| San Francisco | Arroyo Grande/San Francisco, CA | 100.00 | 120 | 120 | 60 | 60 | 85 | ||||||||||||
| 360 | 360 | ||||||||||||||||||
| 2,113 | 2,116 |
*Mineraloelraffinerie Oberrhein GmbH.
**Clean product capacities are maximum rates for each clean product category, independent of each other. They are not additive when calculating the clean product yield capability for each refinery.
Primary crude oil characteristics and sources of crude oil for our refineries are as follows:
| Characteristics | Sources | |||||||||
| Sweet | Medium Sour | Heavy Sour | High TAN* | United States | Canada | South America | Europe | Middle East & Africa | ||
| Bayway | l | l | l | l | l | |||||
| Humber | l | l | l | l | l | |||||
| MiRO | l | l | l | l | l | |||||
| Alliance | l | l | ||||||||
| Lake Charles | l | l | l | l | l | l | l | l | ||
| Sweeny | l | l | l | l | l | l | l | |||
| Wood River | l | l | l | l | l | |||||
| Borger | l | l | l | l | ||||||
| Ponca City | l | l | l | l | ||||||
| Billings | l | l | l | l | ||||||
| Ferndale | l | l | l | l | ||||||
| Los Angeles | l | l | l | l | l | l | l | |||
| San Francisco | l | l | l | l | l | l | l |
*High TAN (Total Acid Number): acid content greater than or equal to 1.0 milligram of potassium hydroxide (KOH) per gram.
Atlantic Basin/Europe Region
Bayway Refinery
The Bayway Refinery is located on the New York Harbor in Linden, New Jersey. Bayway refining units include a fluid catalytic cracking unit, two hydrodesulfurization units, a naphtha reformer, an alkylation unit and other processing equipment. The refinery produces a high percentage of transportation fuels, such as gasoline, diesel and jet fuels, as well as petrochemical feedstocks, residual fuel oil and home heating oil. Refined products are distributed to East Coast customers by pipeline, barge, railcar and truck. The complex also includes a 775-million-pound-per-year polypropylene plant.
Humber Refinery
The Humber Refinery is located on the east coast of England in North Lincolnshire, United Kingdom. It produces a high percentage of transportation fuels, such as gasoline, diesel and jet fuels. Humber’s facilities encompass fluid catalytic cracking, thermal cracking and coking. The refinery has two coking units with associated calcining plants, which upgrade the heaviest part of the crude barrel and imported feedstocks into light oil products and high-value graphite and anode petroleum cokes. Humber is the only coking refinery in the United Kingdom, and a major producer of specialty graphite cokes and anode coke. Approximately 70 percent of the light oils produced in the refinery are marketed in the United Kingdom, while the other products are exported to the rest of Europe, West Africa and the United States.
MiRO Refinery
The Mineraloelraffinerie Oberrhein GmbH (MiRO) Refinery, located on the Rhine River in Karlsruhe in southwest Germany, is a joint venture in which we own an 18.75 percent interest. Facilities include three crude unit trains, fluid catalytic cracking, petroleum coking and calcining, hydrodesulfurization, naphtha reformer, isomerization, ethyl tert-butyl ether and alkylation units. MiRO produces a high percentage of transportation fuels, such as gasoline and diesel fuels. Other products include petrochemical feedstocks, home heating oil, bitumen, and anode- and fuel-grade petroleum coke. Refined products are delivered to customers in Germany, Switzerland and Austria by truck, railcar and barge.
Whitegate Refinery
In September 2016, we sold our interest in the Whitegate Refinery, in Cork, Ireland.
Gulf Coast Region
Alliance Refinery
The Alliance Refinery is located on the Mississippi River in Belle Chasse, Louisiana. The single-train facility includes a fluid catalytic cracking unit, alkylation, delayed coking, hydrodesulfurization units, a naphtha reformer and aromatics unit. Alliance produces a high percentage of transportation fuels, such as gasoline, diesel and jet fuels. Other products include petrochemical feedstocks, home heating oil and anode-grade petroleum coke. The majority of the refined products are distributed to customers in the southeastern and eastern United States through major common-carrier pipeline systems and by barge. Refined products are also sold into export markets through the refinery’s marine terminal.
Lake Charles Refinery
The Lake Charles Refinery is located in Westlake, Louisiana. Its facilities include fluid catalytic cracking, hydrocracking, delayed coking and hydrodesulfurization units. The refinery produces a high percentage of transportation fuels, such as low-sulfur gasoline and off-road diesel, along with home heating oil. The majority of its refined products are distributed by truck, railcar, barge or major common carrier pipelines to customers in the southeastern and eastern United States. Refined products can also be sold into export markets through the refinery’s marine terminal. Refinery facilities also include a specialty coker and calciner, which produce graphite petroleum coke for the steel industry.
Sweeny Refinery
The Sweeny Refinery is located in Old Ocean, Texas, approximately 65 miles southwest of Houston. Refinery facilities include fluid catalytic cracking, delayed coking, alkylation, a naphtha reformer and hydrodesulfurization units. The refinery receives crude oil by pipeline and via tankers, through wholly and jointly owned terminals on the Gulf Coast, including a deepwater terminal at Freeport, Texas. It produces a high percentage of transportation fuels, such as gasoline, diesel and jet fuels. Other products include petrochemical feedstocks, home heating oil and fuel-grade petroleum coke. We operate nearby terminals and storage facilities, along with pipelines that connect these facilities to the refinery. Refined products are distributed throughout the Midwest, southeastern and eastern United States by pipeline, barge and railcar.
MSLP
Merey Sweeny, L.P. (MSLP) owns a delayed coker and related facilities at the Sweeny Refinery. MSLP processes long residue, which is produced from heavy sour crude oil, for a processing fee. Fuel-grade petroleum coke is produced as a by-product and becomes the property of MSLP. See Note 5—Business Combinations, in the Notes to Consolidated Financial Statements, for information on the ownership of MSLP.
Central Corridor Region
WRB Refining LP (WRB)
We are the operator and managing partner of WRB, a 50/50 joint venture with Cenovus Energy Inc., which consists of the Wood River and Borger refineries.
WRB’s gross processing capability of heavy Canadian or similar crudes ranges between 235,000 and 255,000 barrels per day.
| • | Wood River Refinery |
The Wood River Refinery is located in Roxana, Illinois, about 15 miles northeast of St. Louis, Missouri, at the confluence of the Mississippi and Missouri rivers. Operations include three distilling units, two fluid catalytic cracking units, alkylation, hydrocracking, two delayed coking units, naphtha reforming, hydrotreating and sulfur recovery. The refinery produces a high percentage of transportation fuels, such as gasoline, diesel and jet fuels. Other products include petrochemical feedstocks, asphalt and coke. Finished product leaves Wood River by pipeline, rail, barge and truck.
| • | Borger Refinery |
The Borger Refinery is located in Borger, Texas, in the Texas Panhandle, approximately 50 miles north of Amarillo. The refinery facilities encompass coking, fluid catalytic cracking, alkylation, hydrodesulfurization and naphtha reforming, and a 45,000-barrel-per-day NGL fractionation facility. It produces a high percentage of
transportation fuels, such as gasoline, diesel and jet fuels, as well as coke, NGL and solvents. Refined products are transported via pipelines from the refinery to West Texas, New Mexico, Colorado and the Midcontinent region.
Ponca City Refinery
The Ponca City Refinery is located in Ponca City, Oklahoma. Its facilities include fluid catalytic cracking, alkylation, delayed coking and hydrodesulfurization units. It produces a high percentage of transportation fuels, such as gasoline, diesel, and jet fuels, as well as LPG and anode-grade petroleum coke. Finished petroleum products are primarily shipped by company-owned and common-carrier pipelines to markets throughout the Midcontinent region.
Billings Refinery
The Billings Refinery is located in Billings, Montana. Its facilities include fluid catalytic cracking and hydrodesulfurization units, in addition to a delayed coker, which converts heavy, high-sulfur residue into higher-value light oils. The refinery produces a high percentage of transportation fuels, such as gasoline, diesel and aviation fuels, as well as fuel-grade petroleum coke. Finished petroleum products from the refinery are delivered by pipeline, railcar and truck. The pipelines transport most of the refined products to markets in Montana, Wyoming, Idaho, Utah, Colorado and Washington.
West Coast Region
Ferndale Refinery
The Ferndale Refinery is located on Puget Sound in Ferndale, Washington, approximately 20 miles south of the U.S.-Canada border. Facilities include a fluid catalytic cracker, an alkylation unit and a diesel hydrotreater unit. The refinery produces transportation fuels such as gasoline and diesel fuels. Other products include residual fuel oil, which is supplied to the northwest marine transportation market. Most refined products are distributed by pipeline and barge to major markets in the northwest United States.
Los Angeles Refinery
The Los Angeles Refinery consists of two linked facilities located about five miles apart in Carson and Wilmington, California, approximately 15 miles southeast of the Los Angeles International Airport. Carson serves as the front end of the refinery by processing crude oil, and Wilmington serves as the back end by upgrading the intermediate products to finished products. The refinery produces a high percentage of transportation fuels, such as gasoline, diesel and jet fuels. Other products include fuel-grade petroleum coke. The facilities include fluid catalytic cracking, alkylation, hydrocracking, coking, and naphtha reforming units. The refinery produces California Air Resources Board (CARB)-grade gasoline. Refined products are distributed to customers in California, Nevada and Arizona by pipeline and truck.
San Francisco Refinery
The San Francisco Refinery consists of two facilities linked by a 200-mile pipeline. The Santa Maria facility is located in Arroyo Grande, California, about 200 miles south of San Francisco, California, while the Rodeo facility is in the San Francisco Bay Area. Semi-refined liquid products from the Santa Maria facility are sent by pipeline to the Rodeo facility for upgrading into finished petroleum products. The refinery produces a high percentage of transportation fuels, such as gasoline and diesel fuels. Other products include petroleum coke. Process facilities include coking, hydrocracking, hydrotreating and naphtha reforming units. It also produces CARB-grade gasoline. The majority of the refined products are distributed by pipeline and barge to customers in California.
MARKETING AND SPECIALTIES
Our M&S segment purchases for resale and markets refined petroleum products (such as gasolines, distillates and aviation fuels), mainly in the United States and Europe. In addition, this segment includes the manufacturing and marketing of specialty products (such as base oils and lubricants), as well as power generation operations.
Marketing
Marketing—United States
In the United States, as of December 31, 2016, we marketed gasoline, diesel and aviation fuel through approximately 7,850 marketer-owned or -supplied outlets in 48 states. These sites utilize the Phillips 66, Conoco or 76 brands.
At December 31, 2016, our wholesale operations utilized a network of marketers operating approximately 6,100 outlets. We have placed a strong emphasis on the wholesale channel of trade because of its lower capital requirements. In addition, we held brand-licensing agreements covering approximately 850 sites. Our refined products are marketed on both a branded and unbranded basis. A high percentage of our branded marketing sales are made in the Midcontinent, Rockies and West Coast regions, where our wholesale marketing operations provide efficient off-take from our refineries. We continue to utilize consignment fuel agreements with several marketers whereby we own the fuel inventory and pay the marketers a fixed monthly fee.
In the Gulf Coast and East Coast regions, most sales are conducted via unbranded sales which do not require a highly integrated marketing and distribution infrastructure to secure product placement for refinery pull through. We are expanding our export capability at our U.S. coastal refineries to meet growing international demand and increase flexibility to provide product to the highest-value markets. During 2016, we signed a long-term brand licensing agreement with Motiva Enterprises LLC (Motiva) for its use of the 76 brand in its 26-state territory. The agreement is expected to increase branded sales in the East Coast and Gulf Coast regions as Motiva introduces the 76 brand during 2017.
In addition to automotive gasoline and diesel, we produce and market jet fuel and aviation gasoline. At December 31, 2016, aviation gasoline and jet fuel were sold through dealers and independent marketers at approximately 900 Phillips 66-branded locations in the United States.
Marketing—International
We have marketing operations in four European countries. Our European marketing strategy is to sell primarily through owned, leased or joint venture retail sites using a low-cost, high-volume approach. We use the JET brand name to market retail and wholesale products in Austria, Germany and the United Kingdom. In addition, a joint venture in which we have an equity interest markets products in Switzerland under the Coop brand name.
We also market aviation fuels, LPG, heating oils, transportation fuels, marine bunker fuels, bitumen and fuel coke specialty products to commercial customers and into the bulk or spot markets in the above countries.
As of December 31, 2016, we had 1,306 marketing outlets in our European operations, of which 969 were company owned and 337 were dealer owned. In addition, through our joint venture operations in Switzerland, we have interests in 298 additional sites.
Specialties
We manufacture and sell a variety of specialty products, including petroleum coke products, waxes, solvents and polypropylene. Certain manufacturing operations are included in the Refining segment, while the marketing function for these products is included in the Specialties business.
Premium Coke, Polypropylene & Solvents
We market high-quality graphite and anode-grade petroleum cokes in the United States and Europe for use in a variety of industries that include steel, aluminum, titanium dioxide and battery manufacturing. We also market polypropylene in North America under the COPYLENE brand name for use in consumer products, and market specialty solvents that
include pentane, iso-pentane, hexane, heptane and odorless mineral spirits for use in the petrochemical, agriculture and consumer markets.
Excel Paralubes
We own a 50 percent interest in Excel Paralubes, a joint venture which owns a hydrocracked lubricant base oil manufacturing plant located adjacent to the Lake Charles Refinery. The facility has a nameplate capacity of 22,200 barrels per day of high-quality, clear hydrocracked base oils.
Lubricants
We manufacture and sell automotive, commercial, industrial and specialty lubricants which are marketed worldwide under the Phillips 66, Kendall and Red Line brands, as well as other private label brands. We also market Group II Pure Performance base oils globally as well as import and market Group III Ultra-S base oils through an agreement with South Korea’s S-Oil corporation.
Other
Power Generation
We own a cogeneration power plant located adjacent to the Sweeny Refinery. The plant generates electricity and provides process steam to the refinery, as well as merchant power into the Texas market. The plant has a net electrical output of 440 megawatts and is capable of generating up to 3.6 million pounds per hour of process steam.
TECHNOLOGY DEVELOPMENT
Our Technology organization conducts applied and fundamental research in three areas: 1) support for our current business, 2) new environmental solutions for governmental regulations and 3) future growth. Technology programs include evaluating advantaged crudes; and modeling to reduce energy consumption, increase product yield and increase reliability. Our sustainability group is focusing efforts on organic photovoltaic polymers, solid oxide fuel cells, atmospheric modeling and air chemistry, water use and reuse and renewable fuels. Additionally, we monitor disruptive technologies such as electric vehicles and impacts of the digital space on energy consumption, and perform research and monitoring of developments in battery technology.
COMPETITION
The Midstream segment, through our equity investment in DCP Midstream and our other operations, competes with numerous integrated petroleum companies, as well as natural gas transmission and distribution companies, to deliver components of natural gas to end users in commodity natural gas markets. DCP Midstream is one of the leading natural gas gatherers and processors in the United States based on wellhead volumes, and one of the largest U.S. producers and marketers of NGL, based on published industry sources. Principal methods of competing include economically securing the right to purchase raw natural gas for gathering systems, managing the pressure of those systems, operating efficient NGL processing plants and securing markets for the products produced.
In the Chemicals segment, CPChem is ranked among the top 10 producers of many of its major product lines according to published industry sources, based on average 2016 production capacity. Petroleum products, petrochemicals and plastics are typically delivered into the worldwide commodity markets. Our Refining and M&S segments compete primarily in the United States and Europe. Based on the statistics published in the December 5, 2016, issue of the Oil & Gas Journal, we are one of the largest refiners of petroleum products in the United States. Elements of competition for both our Chemicals and Refining segments include product improvement, new product development, low-cost structures, and efficient manufacturing and distribution systems. In the marketing portion of the business, competitive factors include product properties and processibility, reliability of supply, customer service, price and credit terms, advertising and sales promotion, and development of customer loyalty to branded products.
GENERAL
At December 31, 2016, we held a total of 347 active patents in 24 countries worldwide, including 244 active U.S. patents. The overall profitability of any business segment is not dependent on any single patent, trademark, license or franchise.
Company-sponsored research and development activities charged against earnings were $60 million, $65 million and $62 million in 2016, 2015 and 2014, respectively.
In support of our goal to attain zero incidents, we have implemented a comprehensive Health, Safety and Environmental (HSE) management system to support consistent management of HSE risks across our enterprise. The management system is designed to ensure that personal safety, process safety, and environmental impact risks are identified and mitigation steps are taken to reduce the risk. The management system requires periodic audits to ensure compliance with government regulations, as well as our internal requirements. Our commitment to continuous improvement is reflected in annual goal setting and performance measurement.
See the environmental information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity—Contingencies” under the captions “Environmental” and “Climate Change.” It includes information on expensed and capitalized environmental costs for 2016 and those expected for 2017 and 2018.
Website Access to SEC Reports
Our Internet website address is http://www.phillips66.com. Information contained on our Internet website is not part of this report on Form 10-K.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available on our website, free of charge, as soon as reasonably practicable after such reports are filed with, or furnished to, the U.S. Securities and Exchange Commission (SEC). Alternatively, you may access these reports at the SEC’s website at http://www.sec.gov.