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10-K 1 psx-20171231_10k.htm 10-K
| 2017 |
| 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, 2017 | |
| 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, $0.01 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. | [X] | |||
| 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 [ ] | |
| Emerging growth company [ ] | ||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | [ ] | |||
| 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, 2017, the last business day of the registrant’s most recently completed second fiscal quarter, based on the closing price on that date of $82.69, was $42.3 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 501,237,339 shares of common stock outstanding at January 31, 2018.
Documents incorporated by reference:
Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 9, 2018 (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, 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). Phillips 66 stock trades on the New York Stock Exchange under the “PSX” stock symbol.
Our business is organized into four operating segments:
| 1) | Midstream—Provides crude oil and refined products transportation, terminaling and processing services, as well as natural gas, natural gas liquids (NGL) and liquefied petroleum gas (LPG) transportation, storage, processing and marketing services, mainly in the United States. This segment includes our master limited partnership (MLP), Phillips 66 Partners LP (Phillips 66 Partners), 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—Refines crude oil and other feedstocks into petroleum products (such as gasoline, distillates and aviation fuels) at 13 refineries in the United States and Europe. |
| 4) | Marketing and Specialties—Purchases for resale and markets refined petroleum products, 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. |
Corporate and Other includes general corporate overhead, interest expense, our investment in new technologies and various other corporate activities. Corporate assets include all cash and cash equivalents.
At December 31, 2017, Phillips 66 had approximately 14,600 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 products to market, and provides terminaling and storage services for crude oil and petroleum products. |
| • | NGL and Other—Transports, stores, fractionates and markets NGL in the United States, exports LPG and provides other fee-based processing services. |
| • | DCP Midstream—Gathers, processes, transports and markets natural gas and transports, fractionates and markets NGL. |
Phillips 66 Partners
In 2013, we formed Phillips 66 Partners, an MLP, to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum products and NGL pipelines and terminals, as well as other midstream assets. At December 31, 2017, we owned a 55 percent limited partner interest and a 2 percent general partner interest in Phillips 66 Partners, while the public owned a 43 percent limited partner interest and 13.8 million perpetual convertible preferred units.
Headquartered in Houston, Texas, Phillips 66 Partners’ assets and equity investments currently consist of crude oil, refined petroleum products and NGL transportation, terminaling and storage systems, as well as crude oil and NGL processing facilities, that are geographically dispersed throughout the United States. The majority of Phillips 66 Partners’ assets are integral to Phillips 66-operated refineries.
During 2017, Phillips 66 Partners expanded its business by acquiring from us:
| • | A 25 percent interest in both Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO), which collectively own the Bakken Pipeline. |
| • | A 100 percent interest in Merey Sweeny, L.P. (MSLP), a limited partnership that owns a delayed coker and performs crude oil processing at our Sweeny Refinery. |
This acquisition closed in October 2017. See Note 27—Phillips 66 Partners LP, in the Notes to the Consolidated Financial Statements, for more information on this transaction.
The operations and financial results of Phillips 66 Partners are included in Midstream’s Transportation and NGL and Other 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 products, crude oil and LPG terminals; a petroleum coke handling facility; marine vessels; railcars and trucks.
Pipelines and Terminals
At December 31, 2017, our Transportation business managed over 21,000 miles of crude oil, natural gas, NGL and petroleum product 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, 19 crude oil terminals and 1 petroleum coke exporting facility.
The Beaumont Terminal in Nederland, Texas, is the largest terminal in the Phillips 66 portfolio. During 2017, we continued to invest in the terminal by adding 0.9 million barrels of crude storage capacity and 1.3 million barrels of products storage. At December 31, 2017, including these additions, the terminal capacity was 11.1 million barrels, of which 7.4 million barrels was crude oil storage capacity and 3.7 million barrels was refined product storage capacity. We have 3.5 million barrels of incremental crude storage capacity under construction that will be commissioned throughout 2018. In addition, during the fourth quarter of 2017, we completed expansion of the terminal’s export facilities from 400,000 to 600,000 barrels per day (BPD). We have also initiated a variety of other projects aimed at increasing storage and throughput capabilities as we continue the expansion of the Beaumont terminal to 16 million barrels.
The Bakken Pipeline went into commercial service in June 2017. The pipeline is approximately 1,915 miles long with an estimated capacity of 525,000 BPD at December 31, 2017. Phillips 66 Partners has a 25 percent interest in the Bakken Pipeline, through its 25 percent interests in both the Dakota Access and ETCO joint ventures. Energy Transfer Partners, L.P. (ETP) and MarEn Bakken Company LLC also have 38.25 percent and 36.75 percent interests, respectively, in the Bakken Pipeline, with ETP serving as the operator. The Dakota Access section of the Bakken Pipeline is approximately 1,172 miles long and delivers crude oil from the Bakken/Three Forks production area in North Dakota to a storage and terminaling hub outside of Patoka, Illinois, which includes an interconnection with the ETCO pipeline. The ETCO pipeline section of the Bakken Pipeline is approximately 743 miles long and transports crude oil from the Midwest to Phillips 66 and ETP storage terminals located in Nederland, Texas.
The Bayou Bridge Pipeline joint venture delivers crude oil from Nederland, Texas, to Lake Charles, Louisiana. At December 31, 2017, this pipeline had capacity of approximately 480,000 BPD. Phillips 66 Partners has a 40 percent interest in the joint venture, and ETP has a 60 percent interest and serves as the operator. The remaining section of the pipeline, which is being constructed, will deliver crude oil from Lake Charles to St. James, Louisiana, and is expected to be completed in the second half of 2018.
The Sacagawea Pipeline is owned by the joint venture Sacagawea Pipeline Company, LLC, in 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. In August 2017, a new origin point on the Sacagawea Pipeline near New Town, North Dakota, was established, enabling crude to flow from this origin point to the Bakken Pipeline at Johnson’s Corner, Keene Terminal, Palermo Terminal, and North Dakota Pipeline at Stanley, North Dakota.
Phillips 66 Partners and Plains All American Pipeline, L.P. each own a 50 percent interest in the STACK Pipeline LLC joint venture, which owns and operates a crude oil storage terminal and a common carrier pipeline that transports crude oil from the Sooner Trend, Anadarko Basin, Canadian and Kingfisher Counties (STACK) play in northwestern Oklahoma to Cushing, Oklahoma. During the fourth quarter of 2017, this joint venture completed an expansion project to loop the existing pipeline and extend further into the STACK play, which increased capacity by 150,000 BPD.
The following table depicts our ownership interest in major pipeline systems as of December 31, 2017:
| Name | Origination/Terminus | Interest | Size | Length (Miles) | Gross Capacity (MBD) | ||||||||
| Crude and Feedstocks | |||||||||||||
| Bakken Pipeline † | North Dakota/Nederland, TX | 25 | % | 30” | 1,915 | 525 | |||||||
| 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” | 95 | 175 | ||||||||
| STACK PL † | Cashion, OK/Cushing, OK | 50 | 8”-16” | 149 | 250 | ||||||||
| 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 | 133 | ||||||||
| Sand Hills**† | Permian Basin/Mont Belvieu, TX | 33 | 20” | 1,190 | 315 | ||||||||
| 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 | 942 | ||||||||
| Natural Gas | |||||||||||||
| Rockies Express*** | |||||||||||||
| West to East | Meeker, CO/Clarington, OH | 25 | 36”-42” | 1,712 | 1.8 Bcf/d | ||||||||
| East to West | Clarington, OH/Moultrie, IL | 25 | 24”, 42” | 670 | 2.6 Bcf/d |
† Owned by Phillips 66 Partners; Phillips 66 held a 57 percent ownership interest in Phillips 66 Partners at December 31, 2017.
- Total pipeline system is 419 miles. Phillips 66 has an ownership interest in multiple segments totaling 49 miles.
** Operated by DCP Midstream, LP; Phillips 66 Partners holds a direct one-third ownership interest in the pipeline entities.
*** Total pipeline system consists of three zones for a total of 1,712 miles. The third zone of the pipeline is bi-directional and can transport 2.6 Bcf/d of natural gas from east-to-west.
The following table depicts our ownership interest in finished product terminals as of December 31, 2017:
| 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 | 3,700 | 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 | 588 | 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; Phillips 66 held a 57 percent ownership interest in Phillips 66 Partners at December 31, 2017.
The following table depicts our ownership interest in crude and other terminals as of December 31, 2017:
| Facility Name | Location | Interest | Gross Storage Capacity (MBbl) | Gross Loading Capacity* | |||||||
| Crude and Feedstocks | |||||||||||
| Beaumont | Texas | 100 | % | 7,400 | N/A | ||||||
| Billings † | Montana | 100 | 270 | N/A | |||||||
| Borger | Texas | 50 | 721 | N/A | |||||||
| Clifton Ridge † | Louisiana | 100 | 3,410 | N/A | |||||||
| Cushing † | Oklahoma | 100 | 700 | N/A | |||||||
| Freeport | Texas | 100 | 2,144 | N/A | |||||||
| Jones Creek | Texas | 100 | 2,577 | N/A | |||||||
| Junction | California | 100 | 523 | N/A | |||||||
| Keene † | North Dakota | 50 | 490 | 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 | 37 | |||||||
| 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 | 9,000 | N/A |
† Owned by Phillips 66 Partners; Phillips 66 held a 57 percent ownership interest in Phillips 66 Partners at December 31, 2017.
- Rail in thousands of barrels daily (MBD); Marine and NGL Facilities in thousands of barrels per hour.
Rockies Express Pipeline LLC (REX)
We own a 25 percent interest in REX, which owns a natural gas pipeline system with approximately 1,712 miles of transportation pipelines, including laterals, extending from Opal, Wyoming, and Meeker, Colorado, to Clarington, Ohio. The REX Pipeline delivers natural gas to markets, primarily in the Midwest, from both the Rocky Mountain region and the Appalachian Basin.
Marine Vessels
At December 31, 2017, we had 11 international-flagged crude oil and product tankers under time charter contracts, with capacities ranging in size from 300,000 to 1,100,000 barrels. Additionally, we had under time charter contract two Jones Act-compliant tankers and 38 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
Our truck and rail fleets support our feedstock and distribution operations. Rail movements are provided via a fleet of more than 10,000 owned and leased railcars. Truck movements are provided through numerous third-party trucking companies, as well as through our 100-percent-owned subsidiary, Sentinel Transportation LLC.
NGL and Other
Our NGL and Other business includes the following:
| • | A U.S. Gulf Coast NGL market hub comprising the Freeport LPG Export Terminal and Phillips 66 Partners’ 100,000 BPD Sweeny Fractionator. These assets are supported by 9 million barrels of gross capacity at Phillips 66 Partners’ Clemens storage facility. We refer to these facilities as the “Sweeny Hub.” |
| • | A 22.5 percent 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 undivided interest in a fractionation plant in Mont Belvieu, Texas. Our net share of its capacity is 30,250 BPD. |
| • | A 40 percent undivided interest in a fractionation plant in Conway, Kansas. Our net share of its capacity is 43,200 BPD. |
| • | Phillips 66 Partners owns the River Parish 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 the DCP Sand Hills Pipeline, LLC (Sand Hills) and DCP Southern Hills Pipeline, LLC, which own pipelines that connect Eagle Ford, Permian and Midcontinent production to the Mont Belvieu, Texas, market. |
| • | Phillips 66 Partners, through its ownership of MSLP, owns a 125,000 BPD capacity vacuum distillation unit and a 70,000 BPD capacity delayed coker unit located at our Sweeny Refinery in Old Ocean, Texas. |
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 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.
The Freeport LPG Export 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.
MSLP processes long residue, which is produced from heavy sour crude oil, for a processing fee. The fuel-grade petroleum coke and other by-products produced as a result of the processing are retained by our Sweeny Refinery.
During 2017, Phillips 66 Partners continued development of a new 25,000 BPD isomerization unit at our Lake Charles Refinery to increase production of higher octane gasoline blend components. The project is expected to be completed by the end of 2019.
DCP Midstream
Our Midstream segment includes our 50 percent equity investment in DCP Midstream, which is headquartered in Denver, Colorado. As of December 31, 2017, DCP Midstream owned or operated 61 natural gas processing facilities, with a net processing capacity of approximately 7.8 billion cubic feet per day (Bcf/d). 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 63,000 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 contracts. The primary commitment on certain contracts 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 2017, DCP Midstream completed or advanced the following growth projects:
| • | In the first quarter of 2017, DCP Midstream announced the construction of a 200-million-cubic-feet-per-day (MMcf/d) natural gas processing plant, the Mewbourn 3 plant, and further expansion of its Grand Parkway gathering system. Both are located in the Denver-Julesburg (DJ) Basin and are expected to be in service in the third quarter of 2018. |
| • | In the second quarter of 2017, DCP Midstream approved the 200 MMcf/d O'Connor 2 natural gas processing plant in the DJ Basin. The O'Connor 2 plant and associated gathering infrastructure are expected to be in service in 2019. |
| • | In the second quarter of 2017, DCP Midstream increased capacity in the DJ Basin by up to 40 MMcf/d by placing additional field compression and plant bypass infrastructure in service. |
| • | In the third quarter of 2017, DCP Midstream executed definitive joint-venture agreements on its 25 percent interest in the development of the Gulf Coast Express pipeline project (GCX project). The GCX project is designed to transport up to 1.98 Bcf/d of natural gas. The mostly 42-inch pipeline would traverse approximately 500 miles and be placed in service in 2019, pending regulatory approvals. |
| • | DCP Midstream is jointly developing the Cheyenne Connector pipeline with Tallgrass Energy Partners, LP (Tallgrass) and Western Gas Partners, LP (Western Gas). Tallgrass serves as the operator, and both DCP Midstream and Western Gas hold an option to invest in this pipeline at a later date. The Cheyenne Connector pipeline will provide takeaway solutions with capacity of at least 600 MMcf/d for DCP Midstream's DJ Basin assets, connecting natural gas to REX’s Cheyenne Hub, where it can then be delivered to numerous demand markets across the country. |
| • | DCP Midstream is currently expanding the Sand Hills Pipeline to 365,000 BPD, which is expected to be completed in the first quarter of 2018. Further expansion to 450,000 BPD is progressing and is expected to be in service during the second half of 2018. This expansion includes a partial looping of the pipeline and the addition of new pump stations. |
Effective January 1, 2017, DCP Midstream 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 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, DCP Midstream retained its incentive distribution rights in DCP Partners through its ownership of the general partner of DCP Partners, and DCP Midstream held a 36 percent limited partner interest and a 2 percent general partner 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.
CHEMICALS
The Chemicals segment consists of our 50 percent equity investment in CPChem, which is headquartered in The Woodlands, Texas. At the end of 2017, CPChem owned or had joint-venture interests in 30 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 (NAO) 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. 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 in 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 and the United States.
The following table reflects CPChem’s petrochemicals and plastics product capacities at December 31, 2017:
| Millions of Pounds per Year | |||||
| U.S. | Worldwide | ||||
| O&P | |||||
| Ethylene | 8,110 | 10,585 | |||
| Propylene | 2,675 | 3,180 | |||
| High-density polyethylene | 5,305 | 7,600 | |||
| Low-density polyethylene | 620 | 620 | |||
| Linear low-density polyethylene | 1,590 | 1,590 | |||
| Polypropylene | — | 310 | |||
| Normal alpha olefins | 2,335 | 2,850 | |||
| Polyalphaolefins | 125 | 255 | |||
| Polyethylene pipe | 590 | 590 | |||
| Total O&P | 21,350 | 27,580 | |||
| 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 | |||
| Specialty chemicals | 439 | 574 | |||
| Total SA&S | 5,984 | 8,504 | |||
| Total O&P and SA&S | 27,334 | 36,084 |
Capacities include CPChem’s share in equity affiliates and excludes CPChem’s NGL fractionation capacity.
In 2017, CPChem continued construction of two polyethylene facilities and an ethane cracker in the U.S. Gulf Coast region. This project leverages the development of the significant shale resources in the United States. The polyethylene facilities successfully completed commissioning and start-up in September 2017. The two polyethylene units, each with an annual capacity of 1.1 billion pounds, are located near CPChem’s Sweeny facility in Old Ocean, Texas. CPChem’s Cedar Bayou facility in Baytown, Texas, is the location of the 3.3 billion-pound-per-year ethane cracker. Mechanical completion of the ethane cracker was achieved in December 2017, and commissioning is expected to be completed in the first quarter of 2018, with a transition to full production during the second quarter of 2018.
In February 2017, CPChem completed the sale of its K-Resin® styrene-butadiene copolymers (SBC) business, which included the K-Resin® SBC plant in the Yeosu Petrochemical Complex in South Korea.
In April 2017, CPChem completed expansion of the polyalphaolefins capacity at its Cedar Bayou plant by 20 million pounds per year, or 20 percent. This expansion, together with the NAO capacity added in 2015, allows CPChem to meet the increasing demand for high-performance lubricants feedstocks.
In October 2017, CPChem completed the sale of its equity investment in Petrochemical Conversion Company, which included nylon 6,6, nylon compounding, and polymer conversion assets.
REFINING
Our Refining segment refines crude oil and other feedstocks into petroleum products (such as gasoline, distillates and aviation fuels) at 13 refineries in the United States and Europe.
The table below depicts information for each of our U.S. and international refineries at December 31, 2017:
| Thousands of Barrels Daily | |||||||||||||||||||
| Region/Refinery | Location | Interest | Net Crude Throughput Capacity | Net Clean Product Capacity** | Clean Product Yield Capability | ||||||||||||||
| At December 31 2017 | Effective January 1 2018 | Gasolines | Distillates | ||||||||||||||||
| Atlantic Basin/Europe | |||||||||||||||||||
| Bayway | Linden, NJ | 100.00 | % | 241 | 258 | 155 | 130 | 92 | % | ||||||||||
| Humber | N. Lincolnshire, United Kingdom | 100.00 | 221 | 221 | 95 | 115 | 81 | ||||||||||||
| MiRO* | Karlsruhe, Germany | 18.75 | 58 | 58 | 25 | 25 | 87 | ||||||||||||
| 520 | 537 | ||||||||||||||||||
| Gulf Coast | |||||||||||||||||||
| Alliance | Belle Chasse, LA | 100.00 | 247 | 247 | 130 | 120 | 87 | ||||||||||||
| Lake Charles | Westlake, LA | 100.00 | 249 | 249 | 100 | 115 | 70 | ||||||||||||
| Sweeny | Old Ocean, TX | 100.00 | 247 | 256 | 135 | 120 | 86 | ||||||||||||
| 743 | 752 | ||||||||||||||||||
| Central Corridor | |||||||||||||||||||
| Wood River | Roxana, IL | 50.00 | 157 | 157 | 85 | 60 | 81 | ||||||||||||
| Borger | Borger, TX | 50.00 | 73 | 73 | 50 | 30 | 91 | ||||||||||||
| Ponca City | Ponca City, OK | 100.00 | 203 | 203 | 120 | 95 | 93 | ||||||||||||
| Billings | Billings, MT | 100.00 | 60 | 60 | 35 | 30 | 90 | ||||||||||||
| 493 | 493 | ||||||||||||||||||
| West Coast | |||||||||||||||||||
| Ferndale | Ferndale, WA | 100.00 | 101 | 105 | 65 | 35 | 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 | 65 | 85 | ||||||||||||
| 360 | 364 | ||||||||||||||||||
| 2,116 | 2,146 |
- 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 | l | ||||
| MiRO | l | l | l | l | l | |||||
| Alliance | l | 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 | 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’s facilities include crude distilling, naphtha reforming, fluid catalytic cracking, solvent deasphalting, hydrodesulfurization and alkylation units. The complex also includes a polypropylene plant with the capacity to produce up to 775 million pounds per year. The refinery produces a high percentage of transportation 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.
Humber Refinery
The Humber Refinery is located on the east coast of England in North Lincolnshire, United Kingdom, approximately 180 miles north of London, United Kingdom. Humber’s facilities include crude distilling, naphtha reforming, fluid catalytic cracking, hydrodesulfurization, thermal cracking and delayed coking units. The refinery has two coking units with associated calcining plants, which produce high-value graphite and anode petroleum cokes. The refinery produces a high percentage of transportation fuels. 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 by the refinery are distributed to customers in the United Kingdom by pipeline, railcar and truck, while the other products are exported to the rest of Europe, West Africa and the United States by waterborne cargo.
MiRO Refinery
The MiRO Refinery is located on the Rhine River in Karlsruhe, Germany, approximately 95 miles south of Frankfurt, Germany. MiRO is a joint venture in which we own an 18.75 percent interest. Facilities include crude distilling, naphtha reforming, fluid catalytic cracking, petroleum coking and calcining, hydrodesulfurization, isomerization, ethyl tert-butyl ether and alkylation units. MiRO produces a high percentage of transportation fuels. Other products include petrochemical feedstocks, home heating oil, bitumen, anode-grade petroleum coke and petroleum coke. Refined products are distributed to customers in Germany, Switzerland and Austria by truck, railcar and barge.
Gulf Coast Region
Alliance Refinery
The Alliance Refinery is located on the Mississippi River in Belle Chasse, Louisiana, approximately 25 miles southeast of New Orleans, Louisiana. The single-train facility includes crude distilling, naphtha reforming, fluid catalytic cracking, alkylation, hydrodesulfurization, aromatics and delayed coking units. Alliance produces a high percentage of transportation fuels. Other products include petrochemical feedstocks, home heating oil and anode-grade petroleum coke. 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 exported primarily to customers in Latin America by waterborne cargo.
Lake Charles Refinery
The Lake Charles Refinery is located in Westlake, Louisiana, approximately 150 miles east of Houston, Texas. Refinery facilities include crude distilling, naphtha reforming, fluid catalytic cracking, alkylation, hydrocracking, hydrodesulfurization and delayed coking units. Refinery facilities also include a specialty coker and calciner. The refinery produces a high percentage of transportation fuels. Other products include off-road diesel, home heating oil, feedstock for our Excel Paralubes joint venture in our M&S segment, specialty graphite petroleum coke and petroleum coke. The majority of the refined products are distributed to customers in the southeastern and eastern United States by truck, railcar, barge or major common carrier pipelines. Refined products are also exported primarily to customers in Latin America and West Africa by waterborne cargo.
Sweeny Refinery
The Sweeny Refinery is located in Old Ocean, Texas, approximately 65 miles southwest of Houston, Texas. Refinery facilities include crude distilling, naphtha reforming, fluid catalytic cracking, alkylation, hydrodesulfurization, and aromatics units, as well as access to the on-site vacuum tower and delayed coking unit, which effective October 2017 became an asset owned by Phillips 66 Partners. The refinery produces a high percentage of transportation fuels. Other products include petrochemical feedstocks, home heating oil and petroleum coke. 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. Refined products are distributed to customers throughout the Midcontinent region, southeastern and eastern United States by pipeline, barge and railcar. Refined products are also exported primarily to customers in Latin America by waterborne cargo.
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.
| • | 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. Refinery facilities include crude distilling, naphtha reforming, fluid catalytic cracking, alkylation, hydrocracking, hydrodesulfurization and delayed coking units. The refinery produces a high percentage of transportation fuels. Other products include petrochemical feedstocks, asphalt and petroleum coke. Refined products are distributed to customers by pipeline, railcar, barge and truck and are shipped to markets throughout the Midcontinent region.
| • | Borger Refinery |
The Borger Refinery is located in Borger, Texas, in the Texas Panhandle, approximately 50 miles north of Amarillo, Texas. Refinery facilities include crude distilling, naphtha reforming, fluid catalytic cracking, alkylation, hydrodesulfurization, and delayed coking units, as well as an NGL fractionation facility. It produces a high percentage of transportation fuels, as well as petroleum coke, NGL’s and solvents. Refined products are distributed to customers 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, approximately 95 miles northwest of Tulsa, Oklahoma. Its facilities include crude distilling, naphtha reforming, fluid catalytic cracking, alkylation, hydrodesulfurization, and delayed coking units. It produces a high percentage of transportation fuels and anode-grade petroleum coke. Refined products are primarily distributed to customers 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 crude distilling, naphtha reforming, fluid catalytic cracking, alkylation, hydrodesulfurization and delayed coking units. The refinery produces a high percentage of transportation fuels and petroleum coke. Finished petroleum products from the refinery are distributed to customers by pipeline, railcar and truck. 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 crude distillation, naphtha reforming, fluid catalytic cracking, alkylation and hydrodesulfurization units. The refinery produces a high percentage of transportation fuels. Other products include residual fuel oil, which is supplied to the northwest marine bunker fuel market. Most refined products are distributed to customers 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 five miles apart in Carson and Wilmington, California, approximately 15 miles southeast of Los Angeles. The Carson facility serves as the front end of the refinery by processing crude oil, and the Wilmington facility serves as the back end of the refinery by upgrading the intermediate products to finished products. The facilities include crude distillation, naphtha reforming, fluid catalytic cracking, alkylation, hydrocracking, and delayed coking units. The refinery produces a high percentage of transportation fuels. The refinery produces California Air Resources Board (CARB)-grade gasoline. Other products include petroleum coke. 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, 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 shipped by pipeline to the Rodeo facility for upgrading into finished petroleum products. Facilities include crude distillation, naphtha reforming, hydrocracking, hydrodesulfurization and delayed coking units, as well as a calciner. The refinery produces a high percentage of transportation fuels. It also produces CARB-grade gasoline. Other products include petroleum coke. The majority of the refined products are distributed to customers in California by pipeline and barge. Additional refined products are also exported to customers in Latin America by waterborne cargo.
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, 2017, we marketed gasoline, diesel and aviation fuel through approximately 7,550 independently owned outlets in 48 states. These sites utilize the Phillips 66, Conoco or 76 brands.
At December 31, 2017, our wholesale operations utilized a network of marketers operating approximately 5,700 outlets. We place a strong emphasis on the wholesale channel of trade because of its lower capital requirements. In addition, we held brand-licensing agreements covering approximately 1,050 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 arrangements 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.
In addition to automotive gasoline and diesel, we produce and market jet fuel and aviation gasoline. At December 31, 2017, aviation gasoline and jet fuel were sold through dealers and independent marketers at approximately 800 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.
At December 31, 2017, we had 1,324 marketing outlets in our European operations, of which 993 were company owned and 331 were dealer owned. In addition, through our COOP joint-venture operations in Switzerland, we have interests in 306 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, Europe and Asia 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 to produce 22,200 BPD of high-quality, clear hydrocracked base oils. The facility’s feedstock is sourced primarily from our Lake Charles Refinery.
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 to address 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 emerging 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 2017 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. We are one of the largest refiners of petroleum products in the United States based on published industry sources. 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, 2017, we held a total of 356 active patents in 18 countries worldwide, including 275 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 in both 2017 and 2016 and $65 million in 2015.
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 2017 and those expected for 2018 and 2019.
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 Annual 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.