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 petroleum product transportation, terminaling and processing services, as well as natural gas and natural gas liquids (NGL) transportation, storage, fractionation, 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% equity investment in DCP Midstream, LLC (DCP Midstream).

2)Chemicals—Consists of our 50% 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 (M&S)—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.

Corporate and Other includes general corporate overhead, interest expense, our investment in new technologies and various other corporate activities. Corporate assets include all cash, cash equivalents and income tax-related assets.

At December 31, 2019, Phillips 66 had approximately 14,500 employees.

SEGMENT AND GEOGRAPHIC INFORMATION

MIDSTREAM

The Midstream segment consists of three business lines:

• Transportation—Transports crude oil and other feedstocks to our refineries and other locations, delivers refined petroleum products to market, and provides terminaling and storage services for crude oil and refined petroleum products.

• NGL and Other—Transports, stores, fractionates, exports and markets NGL 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

Phillips 66 Partners, headquartered in Houston, Texas, is a publicly traded MLP formed in 2013 to own, operate, develop and acquire primarily fee-based midstream assets. On August 1, 2019, Phillips 66 Partners completed a restructuring transaction to eliminate the incentive distribution rights (IDRs) held by us and convert our 2% economic general partner interest into a noneconomic general partner interest in exchange for 101 million Phillips 66 Partners common units. No distributions were made for the general partner interest after August 1, 2019. At December 31, 2019, we owned 170 million Phillips 66 Partners common units, representing a 74% limited partner interest in Phillips 66 Partners, while the public owned a 26% limited partner interest and 13.8 million perpetual convertible preferred units.

Phillips 66 Partners’ operations currently consist of crude oil, refined petroleum product and NGL transportation, terminaling, fractionation, processing and storage assets that are geographically dispersed throughout the United States. The majority of Phillips 66 Partners’ assets are associated with, and integral to, Phillips 66 operated refineries.

The results of operations 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 transportation, terminaling and storage services. These assets include crude oil, refined petroleum product, NGL, and natural gas pipeline systems; crude oil, refined petroleum product and NGL terminals; a petroleum coke handling facility; marine vessels; railcars and trucks.

Pipelines and Terminals

At December 31, 2019, our Transportation business was comprised of over 22,000 miles of crude oil, refined petroleum product, NGL and natural gas pipeline systems in the United States, including those partially owned or operated by our affiliates. We owned or operated 39 refined petroleum product terminals, 20 crude oil terminals, 4 NGL terminals, a petroleum coke exporting facility and various other storage and loading facilities.

The Beaumont Terminal in Nederland, Texas, is the largest terminal in the Phillips 66 portfolio. At December 31, 2019, the terminal storage capacity was 15.5 million barrels, which included 11.8 million barrels of storage capacity for crude oil and 3.7 million barrels of storage capacity for refined petroleum products. We continue to expand capacity at the Beaumont Terminal, and upon completion in the first quarter of 2020, the terminal will have 16.8 million barrels of total crude oil and refined products storage capacity. In addition, we are increasing its export capacity by 200,000 barrels per day (BPD) with the addition of a fourth dock, bringing the terminal’s total dock capacity to 800,000 BPD. The project is expected to be completed in the third quarter of 2020.

The Bayou Bridge Pipeline joint venture transports crude oil from Nederland, Texas, to St. James, Louisiana. A segment of the pipeline from Lake Charles to St. James, Louisiana, was completed on April 1, 2019. Phillips 66 Partners has a 40% interest in the joint venture, and our co-venturer serves as the operator. The pipeline has a capacity of approximately 480,000 BPD.

The Gray Oak Pipeline system will transport up to 900,000 BPD of crude oil from the Permian and Eagle Ford to Texas Gulf Coast destinations that include Corpus Christi, the Sweeny area, including our Sweeny Refinery, as well as access to the Houston market. The pipeline system made its first commercial delivery in November 2019 and is expected to reach full service in the second quarter of 2020. Phillips 66 Partners has a 42.25% effective ownership interest in the pipeline system.

Phillips 66 Partners owns a 25% interest in the South Texas Gateway Terminal, which will connect to the Gray Oak Pipeline in Corpus Christi, Texas. The marine export terminal, under construction by a co-venturer, will have two deepwater docks, storage capacity of 8.5 million barrels and up to 800,000 BPD of throughput capacity. The terminal is expected to start up in the third quarter of 2020.

The Red Oak Pipeline system joint venture will transport crude oil from Cushing, Oklahoma, and the Permian to multiple destinations along the Texas Gulf Coast, including Corpus Christi, Ingleside, Houston, and Beaumont, Texas. The throughput capacity on the pipeline is expected to be 1,000,000 BPD. The pipeline system is supported by long-term shipper commitments, and initial service is expected in the first half of 2021. Our co-venturer will construct the pipeline, and we will operate it. We own a 50% interest in the joint venture.

The Liberty Pipeline joint venture will transport crude oil from the Rockies and Bakken production areas to Cushing, Oklahoma. The throughput capacity on the 24 inch pipeline is expected to be 400,000 BPD. The pipeline is supported by long-term shipper commitments, and service is expected in the first half of 2021. We will construct and operate the pipeline. We own a 50% interest in the joint venture.

The following table depicts our ownership interest in major pipeline systems at December 31, 2019:

Name	State of Origination/Terminus	Interest		Length (Miles)	Gross Capacity (MBD)
Crude Oil
Bakken Pipeline †	North Dakota/Texas	25	%	1,918	570
Bayou Bridge †	Texas/Louisiana	40		213	480
Clifton Ridge †	Louisiana	100		10	260
CushPo †	Oklahoma	100		62	130
Eagle Ford Gathering †	Texas	100		28	54
Glacier †	Montana	79		865	126
Gray Oak Pipeline* †	Texas	42		840	235
Line 100	California	100		79	54
Line 200	California	100		228	93
Line 300	California	100		61	48
Line 400	California	100		153	40
Line O †	Oklahoma/Texas	100		276	37
New Mexico Crude †	New Mexico/Texas	100		227	106
North Texas Crude †	Texas	100		224	28
Oklahoma Crude †	Texas/Oklahoma	100		217	100
Sacagawea †	North Dakota	50		95	175
STACK PL †	Oklahoma	50		149	250
Sweeny Crude	Texas	100		56	265
West Texas Crude †	Texas	100		1,079	156
Refined Petroleum Products
ATA Line †	Texas/New Mexico	50		293	34
Borger to Amarillo †	Texas	100		93	76
Borger-Denver	Texas/Colorado	70		397	38
Cherokee East †	Oklahoma/Missouri	100		287	55
Cherokee North †	Oklahoma/Kansas	100		29	57
Cherokee South †	Oklahoma	100		98	46
Cross Channel Connector †	Texas	100		5	184
Explorer †	Texas/Indiana	22		1,830	660
Gold Line †	Texas/Illinois	100		686	120
Heartland**	Kansas/Iowa	50		49	30
LAX Jet Line	California	50		19	50
Los Angeles Products	California	100		22	112
Paola Products †	Kansas	100		106	96
Pioneer	Wyoming/Utah	50		562	63
Richmond	California	100		14	26
SAAL †	Texas	33		102	32
SAAL †	Texas	54		19	30
Seminoe †	Montana/Wyoming	100		342	33
Standish †	Oklahoma/Kansas	100		92	72
Sweeny to Pasadena †	Texas	100		120	294
Torrance Products	California	100		8	161
Watson Products	California	100		9	238
Yellowstone	Montana/Washington	46		710	66

Name	State of Origination/Terminus	Interest		Length (Miles)	Gross Capacity (MBD)
NGL
Blue Line	Texas/Illinois	100	%	688	29
Brown Line †	Oklahoma/Kansas	100		76	26
Chisholm	Oklahoma/Kansas	50		202	42
Conway to Wichita	Kansas	100		55	38
Medford †	Oklahoma	100		42	10
Powder River	Wyoming/Texas	100		716	14
River Parish NGL †	Louisiana	100		510	133
Sand Hills †	New Mexico/Texas	33		1,506	500
Skelly-Belvieu	Texas	50		571	45
Southern Hills †	Kansas/Texas	33		981	192
Sweeny LPG	Texas	100		232	942
Sweeny NGL	Texas	100		18	204
TX Panhandle Y1/Y2	Texas	100		289	61
Natural Gas
Rockies Express***
East to West	Ohio/Illinois	25		661	2.6 Bcf/d
West to East	Colorado/Ohio	25		1,712	1.8 Bcf/d

† Owned by Phillips 66 Partners; Phillips 66 held 74% of the limited partner interest in Phillips 66 Partners at December 31, 2019.

* Interest reflects Phillips 66 Partners’ proportionate share of the Gray Oak Pipeline system, held through its 65 percent-owned consolidated subsidiary, Gray Oak Holdings, LLC. Gray Oak Holdings, LLC had a 65% ownership interest in Gray Oak Pipeline, LLC at December 31, 2019. Gross capacity reflects the initial accelerated commissioning service capacity at December 31, 2019.

** Total pipeline system is 419 miles. Phillips 66 has an ownership interest in multiple segments totaling 49 miles.

*** Total pipeline system consists of three zones for a total of 1,712 miles. The third zone of the pipeline is bidirectional and can transport 2.6 Bcf/d of natural gas from east to west.

The following table depicts our ownership interest in terminal and storage facilities at December 31, 2019:

Facility Name	Location	Commodity Handled	Interest		Gross Storage Capacity (MBbl)	Gross Rack Capacity (MBD)
Albuquerque †	New Mexico	Refined Petroleum Products	100	%	274	20
Amarillo †	Texas	Refined Petroleum Products	100		296	23
Beaumont	Texas	Crude Oil, Refined Petroleum Products	100		15,500	8
Billings	Montana	Refined Petroleum Products	100		88	12
Billings Crude †	Montana	Crude Oil	100		236	N/A
Borger	Texas	Crude Oil	50		772	N/A
Bozeman	Montana	Refined Petroleum Products	100		130	5
Buffalo Crude †	Montana	Crude Oil	100		303	N/A
Casper †	Wyoming	Refined Petroleum Products	100		365	7
Clemens †	Texas	NGL	100		9,000	N/A
Clifton Ridge †	Louisiana	Crude Oil	100		3,800	N/A
Coalinga	California	Crude Oil	100		817	N/A
Colton	California	Refined Petroleum Products	100		207	20
Cushing †	Oklahoma	Crude Oil	100		675	N/A
Cut Bank †	Montana	Crude Oil	100		315	N/A
Denver	Colorado	Refined Petroleum Products	100		310	43
Des Moines	Iowa	Refined Petroleum Products	50		217	12
East St. Louis †	Illinois	Refined Petroleum Products	100		2,031	62
Freeport	Texas	Crude Oil, Refined Petroleum Products, NGL	100		3,485	N/A
Glenpool †	Oklahoma	Refined Petroleum Products	100		571	18
Great Falls	Montana	Refined Petroleum Products	100		198	6
Hartford †	Illinois	Refined Petroleum Products	100		1,468	21
Helena	Montana	Refined Petroleum Products	100		195	5
Jefferson City †	Missouri	Refined Petroleum Products	100		103	15
Jones Creek	Texas	Crude Oil	100		2,580	N/A
Junction	California	Crude Oil, Refined Petroleum Products	100		524	N/A
Kansas City †	Kansas	Refined Petroleum Products	100		1,410	50
Keene †	North Dakota	Crude Oil	50		503	N/A
La Junta	Colorado	Refined Petroleum Products	100		109	5
Lake Charles Pipeline Storage	Louisiana	Refined Petroleum Products	50		3,143	N/A
Lincoln	Nebraska	Refined Petroleum Products	100		217	12
Linden †	New Jersey	Refined Petroleum Products	100		360	95
Los Angeles	California	Refined Petroleum Products	100		156	80
Lubbock †	Texas	Refined Petroleum Products	100		182	18
Medford Spheres †	Oklahoma	NGL	100		70	N/A
Missoula	Montana	Refined Petroleum Products	50		365	14
Moses Lake	Washington	Refined Petroleum Products	50		216	10
Mount Vernon †	Missouri	Refined Petroleum Products	100		365	40
North Salt Lake	Utah	Refined Petroleum Products	50		755	34
North Spokane	Washington	Refined Petroleum Products	100		492	N/A
Odessa †	Texas	Crude Oil	100		521	N/A
Oklahoma City †	Oklahoma	Crude Oil, Refined Petroleum Products	100		355	42

Facility Name	Location	Commodity Handled	Interest		Gross Storage Capacity (MBbl)	Gross Rack Capacity (MBD)
Palermo †	North Dakota	Crude Oil	70	%	235	N/A
Paola †	Kansas	Refined Petroleum Products	100		978	N/A
Pasadena †	Texas	Refined Petroleum Products	100		3,234	65
Pecan Grove †	Louisiana	Crude Oil	100		177	N/A
Ponca City †	Oklahoma	Refined Petroleum Products	100		71	22
Ponca City Crude †	Oklahoma	Crude Oil	100		1,229	N/A
Portland	Oregon	Refined Petroleum Products	100		650	33
Renton	Washington	Refined Petroleum Products	100		243	19
Richmond	California	Refined Petroleum Products	100		343	28
River Parish †	Louisiana	NGL	100		1,500	N/A
Rock Springs	Wyoming	Refined Petroleum Products	100		132	8
Sacramento	California	Refined Petroleum Products	100		146	12
San Bernard	Texas	Refined Petroleum Products	100		222	N/A
Santa Margarita	California	Crude Oil	100		398	N/A
Sheridan †	Wyoming	Refined Petroleum Products	100		94	6
Spokane	Washington	Refined Petroleum Products	100		351	20
Tacoma	Washington	Refined Petroleum Products	100		316	19
Torrance	California	Crude Oil, Refined Petroleum Products	100		2,128	N/A
Tremley Point †	New Jersey	Refined Petroleum Products	100		1,701	25
Westlake	Louisiana	Refined Petroleum Products	100		128	10
Wichita Falls †	Texas	Crude Oil	100		225	N/A
Wichita North †	Kansas	Refined Petroleum Products	100		769	20
Wichita South †	Kansas	Refined Petroleum Products	100		272	N/A

† Owned by Phillips 66 Partners; Phillips 66 held 74% of the limited partner interest in Phillips 66 Partners at December 31, 2019.

The following table depicts our ownership interest in marine, rail and petroleum coke loading and offloading facilities at December 31, 2019:

Facility Name	Location	Commodity Handled	Interest		Gross Loading Capacity*
Marine
Beaumont	Texas	Crude Oil, Refined Petroleum Products	100	%	60
Clifton Ridge †	Louisiana	Crude Oil, Refined Petroleum Products	100		50
Freeport	Texas	Crude Oil, Refined Petroleum Products, NGL	100		46
Hartford †	Illinois	Refined Petroleum Products	100		3
Pecan Grove †	Louisiana	Crude Oil	100		6
Portland	Oregon	Crude Oil	100		10
Richmond	California	Crude Oil	100		3
San Bernard	Texas	Refined Petroleum Products	100		2
Tacoma	Washington	Crude Oil	100		12
Tremley Point †	New Jersey	Refined Petroleum Products	100		7
Rail
Bayway †	New Jersey	Crude Oil	100		75
Beaumont	Texas	Crude Oil	100		20
Ferndale †	Washington	Crude Oil	100		30
Missoula	Montana	Refined Petroleum Products	50		41
Palermo †	North Dakota	Crude Oil	70		100
Thompson Falls	Montana	Refined Petroleum Products	50		41
Petroleum Coke
Lake Charles	Louisiana	Petroleum Coke	50		N/A

† Owned by Phillips 66 Partners; Phillips 66 held 74% of the limited partner interest in Phillips 66 Partners at December 31, 2019.

* Marine facilities in thousands of barrels per hour; Rail in thousands of barrels daily (MBD).

Marine Vessels

At December 31, 2019, we had 17 international-flagged crude oil, refined petroleum product and NGL tankers and two Jones Act-compliant tankers under time charter contracts, with capacities ranging in size from 300,000 to 2,200,000 barrels. Additionally, we had a variety of inland and offshore tug/barge units. These vessels are used primarily to transport crude oil and other feedstocks, as well as refined petroleum products for certain of our refineries. In addition, the NGL tankers are used to export propane and butane from our fractionation, transportation and storage infrastructure.

Truck and Rail

Our truck and rail fleets support our feedstock and distribution operations. Rail movements are provided via a fleet of approximately 10,000 owned and leased railcars. Truck movements are provided through our wholly owned subsidiary, Sentinel Transportation LLC, and through numerous third-party trucking companies.

NGL and Other

Our NGL and Other business includes the following:

• A U.S. Gulf Coast NGL market hub comprised of the Freeport LPG Export Terminal and Phillips 66 Partners’ 100,000-BPD Sweeny Fractionator. These assets are supported by 9,000,000 barrels of gross capacity at Phillips 66 Partners’ Clemens Caverns storage facility. We refer to these facilities as the “Sweeny Hub.”

• A 22.5% 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% undivided interest in a fractionation plant in Mont Belvieu, Texas. Our net share of its capacity is 30,250 BPD.

• A 40% 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 pipeline 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 NGL pipeline systems that connect the Eagle Ford, Permian Basin and Midcontinent production areas to the Mont Belvieu, Texas, market hub.

• Phillips 66 Partners, through its ownership of Merey Sweeny LLC, owns a vacuum distillation unit with a capacity of 125,000 BPD and a delayed coker unit with a capacity of 70,000 BPD located at our Sweeny Refinery in Old Ocean, Texas.

• In July 2019, Phillips 66 Partners completed the construction of a 25,000 BPD isomerization unit at our Lake Charles Refinery, which reached full production during the year. The project increased Phillips 66’s production of higher-octane gasoline blend components.

Phillips 66 Partners’ Sweeny Fractionator is located adjacent to our Sweeny Refinery in Old Ocean, Texas, and supplies purity ethane to the petrochemical industry and purity NGL 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 the Clemens Caverns storage facility with access to our liquefied petroleum gas (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 approximately 36,000 barrels per hour. In support of the terminal, we have a 100,000 BPD unit near the Sweeny Fractionator to upgrade domestic propane for export. In addition, the terminal exports 10,000 to 15,000 BPD of natural gasoline (C5+) produced at the Sweeny Fractionator.

We are expanding the Sweeny Hub with three additional fractionators, each with a fractionation capacity of 150,000 BPD. Fracs 2 and 3 are anticipated to start up in the fourth quarter of 2020. Frac 4 is expected to be completed in the second quarter of 2021. The new fractionators are supported by long-term customer commitments. Upon completion of Frac 4, the Sweeny Hub will have 550,000 BPD of fractionation capacity. DCP Midstream has committed to supply the fractionators with raw NGL and has an option to acquire up to a 30% ownership interest in Fracs 2 and 3.

At the Sweeny Hub, Phillips 66 Partners is adding 7.5 million barrels of storage capacity at Clemens Caverns. Upon completion in the fourth quarter of 2020, Clemens Caverns will have 16.5 million barrels of storage capacity. Phillips 66 Partners is also constructing the C2G Pipeline, a 16 inch ethane pipeline that will connect Clemens Caverns to petrochemical facilities in Gregory, Texas, near Corpus Christi. The project is supported by long-term commitments and is expected to be completed in mid-2021.

DCP Midstream

Our Midstream segment includes our 50% equity investment in DCP Midstream, which is headquartered in Denver, Colorado. At December 31, 2019, DCP Midstream, through its subsidiary DCP Midstream, LP (DCP Partners), owned or operated 44 active natural gas processing facilities, with a net processing capacity of approximately 6.5 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 58,000 miles of pipeline. DCP Midstream also owned or operated 11 NGL fractionation plants, along with natural gas and NGL storage facilities, and NGL pipelines.

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. In addition, DCP Midstream markets a portion of its NGL to us and our equity affiliates under existing contracts.

On November 6, 2019, DCP Partners completed a transaction to eliminate all general partner economic interests in DCP Partners and IDRs in exchange for 65 million newly issued DCP Partners common units. With completion of the transaction, DCP Midstream held a noneconomic general partner interest and approximately 118 million common units, representing approximately 57% of DCP Partners’ outstanding common units.

During 2019, DCP Midstream completed or advanced the following growth projects:

• The 200 million cubic feet per day (MMcf/d) O’Connor 2 plant was placed into service in the third quarter of 2019, and the associated 100 MMcf/d bypass was placed into service in the fourth quarter of 2019, increasing DCP Midstream’s total available DJ Basin capacity to over 1.4 billion Bcf/d.

• The Gulf Coast Express pipeline began commercial operations in the third quarter of 2019. The pipeline transports approximately 2 Bcf/d of natural gas to Gulf Coast markets. DCP Midstream owns a 25% interest in the pipeline.

• In October 2019, DCP Midstream exercised an option to increase its ownership interest in the Cheyenne Connector to 50%. The 600 MMcf/d natural gas pipeline is expected to be in service in the first half of 2020.

CHEMICALS

The Chemicals segment consists of our 50% equity investment in CPChem, which is headquartered in The Woodlands, Texas. At December 31, 2019, CPChem owned or had joint venture interests in 28 manufacturing facilities located in Belgium, Colombia, Qatar, Saudi Arabia, Singapore and the United States. Additionally, CPChem has two research and development centers in the United States.

We structure our reporting of CPChem’s operations around two primary business lines: Olefins and Polyolefins (O&P) and Specialties, Aromatics and Styrenics (SA&S). The O&P business line produces and markets ethylene and other olefin products. The ethylene produced is primarily used by CPChem to produce polyethylene, normal alpha olefins (NAO) and polyethylene pipe. The SA&S business line manufactures and markets aromatics and styrenics products, such as benzene, cyclohexane, styrene and polystyrene. SA&S also manufactures and/or markets a variety of specialty chemical products including organosulfur chemicals, solvents, catalysts, and chemicals used in drilling and mining.

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 by cracking ethane, propane, butane, natural gasoline or certain refinery liquids, such as naphtha and gas oil. Ethylene primarily is used as a raw material in the production of plastics, such as polyethylene and polyvinyl chloride (PVC). 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.

The following table reflects CPChem’s petrochemicals and plastics product capacities at December 31, 2019:

	Millions of Pounds per Year*
	U.S.	Worldwide
O&P
Ethylene	11,910	14,385
Propylene	2,675	3,180
High-density polyethylene	5,305	7,470
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	500	500
Total O&P	25,060	31,160

SA&S
Benzene	1,600	2,530
Cyclohexane	1,060	1,455
Styrene	1,050	1,875
Polystyrene	835	1,070
Specialty chemicals	440	575
Total SA&S	4,985	7,505
Total O&P and SA&S	30,045	38,665

* Capacities include CPChem’s share in equity affiliates and excludes CPChem’s NGL fractionation capacity.

Effective January 1, 2019, capacity at CPChem’s new ethane cracker at the Cedar Bayou facility in Baytown, Texas, was increased to 1.7 million metric tons per year, which is 15% above the original design capacity.

In June 2019, CPChem signed an agreement with a co-venturer to jointly pursue the development of a petrochemical facility on the U.S. Gulf Coast. The U.S. Gulf Coast II Petrochemical Project is expected to include a 2 million metric tons per year ethylene cracker and two high density polyethylene units, each with capacity of 1 million metric tons per year. CPChem would own a 51% interest in the joint venture and have responsibility for the construction, operation and management of the facility. Final investment decision is expected in 2021, with targeted startup in 2024.

Also in June 2019, CPChem signed an agreement with a co-venturer to jointly pursue the development, construction and operation of a petrochemicals complex in Qatar. The facility is expected to have a 1.9 million metric tons per year ethylene cracker and two high-density polyethylene derivative units with a combined capacity of 1.7 million metric tons per year. Pending final investment decision, the project is expected to start up in late 2025. CPChem will own a 30% interest in the joint venture.

REFINING

Our Refining segment refines crude oil and other feedstocks into petroleum products, such as gasoline, distillates and aviation fuels, at refineries in the United States and Europe.

The table below depicts information for each of our owned and joint venture refineries at December 31, 2019:

				Thousands of Barrels Daily
Region/Refinery	Location	Interest		Net Crude Throughput Capacity		Net Clean Product Capacity**		Clean Product Yield Capability
Region/Refinery	Location	Interest		At December 31 2019	Effective January 1 2020	Gasolines	Distillates	Clean Product Yield Capability
Atlantic Basin/Europe
Bayway	Linden, NJ	100	%	258	258	155	130	92	%
Humber	N. Lincolnshire, United Kingdom	100		221	221	95	115	81
MiRO*	Karlsruhe, Germany	19		58	58	25	25	87
				537	537

Gulf Coast
Alliance	Belle Chasse, LA	100		250	255	130	120	87
Lake Charles	Westlake, LA	100		249	249	105	115	70
Sweeny	Old Ocean, TX	100		265	265	140	125	86
				764	769

Central Corridor
Wood River	Roxana, IL	50		167	173	85	70	81
Borger	Borger, TX	50		75	75	50	35	91
Ponca City	Ponca City, OK	100		213	217	120	100	93
Billings	Billings, MT	100		60	65	35	30	90
				515	530

West Coast
Ferndale	Ferndale, WA	100		105	105	65	35	81
Los Angeles	Carson/Wilmington, CA	100		139	139	85	65	90
San Francisco	Arroyo Grande/Rodeo, CA	100		120	120	60	65	85
				364	364
				2,180	2,200

* 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 owned and joint venture refineries are as follows:

	Characteristics				Sources
	Sweet	Medium Sour	Heavy Sour	High TAN^*	United States	Canada	South and Central 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	l
Sweeny	l	l	l	l	l	l	l
Wood River	l		l	l	l	l
Borger	l	l	l		l	l
Ponca City	l	l	l		l	l
Billings		l	l	l	l	l
Ferndale	l	l			l	l			l
Los Angeles		l	l	l	l	l	l		l
San Francisco	l	l	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.

** Includes Russian crude.

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 petroleum 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. 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. Humber is the only coking refinery in the United Kingdom, and a producer of high-quality specialty graphite and anode-grade petroleum cokes. The refinery also produces a high percentage of transportation fuels. The majority of the light oils produced by the refinery are distributed to customers in the United Kingdom by pipeline, railcar and truck, while the other refined petroleum products are exported throughout the world.

MiRO Refinery

The MiRO Refinery is located on the Rhine River in Karlsruhe, Germany, approximately 95 miles south of Frankfurt, Germany. MiRO is the largest refinery in Germany and operates as a joint venture in which we own an 18.75% 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 produced include petrochemical feedstocks, home heating oil, bitumen, and anode- and fuel-grade petroleum cokes. Refined petroleum products are distributed to customers in Germany, Switzerland, France, 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 produced include petrochemical feedstocks, home heating oil and anode-grade petroleum coke. A majority of the refined petroleum products are distributed to customers in the southeastern and eastern United States through major common carrier pipeline systems and by barge. Additionally, refined petroleum products are exported to customers primarily 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 produced include off-road diesel, home heating oil, feedstock for our Excel Paralubes joint venture in our M&S segment, and high-quality specialty graphite and fuel-grade petroleum cokes. A majority of the refined petroleum products are distributed to customers in the southeastern and eastern United States by truck, railcar, barge or major common carrier pipelines. Additionally, refined petroleum products are exported to customers primarily in Latin America and Europe 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, aromatics units, and a Phillips 66 Partners owned delayed coking unit. The refinery produces a high percentage of transportation fuels. Other products include petrochemical feedstocks, home heating oil and fuel-grade petroleum coke. A majority of the refined petroleum products are distributed to customers throughout the Midcontinent region, southeastern and eastern United States by pipeline, barge and railcar. Additionally, refined petroleum products are exported to customers primarily in Latin America by waterborne cargo.

Central Corridor Region

WRB Refining LP (WRB)

We are the operator and managing partner of WRB, a 50 percent-owned joint venture that owns 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 produced include petrochemical feedstocks, asphalt and fuel-grade petroleum coke. Refined petroleum products are distributed to customers throughout the Midcontinent region by pipeline, railcar, barge and truck.

• 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. The refinery produces a high percentage of transportation fuels, as well as fuel-grade petroleum coke, NGL and solvents. Refined petroleum products are distributed to customers in West Texas, New Mexico, Colorado and the Midcontinent region by company-owned and common carrier pipelines.

Ponca City Refinery

The Ponca City Refinery is located in Ponca City, Oklahoma, approximately 95 miles northwest of Tulsa, Oklahoma. Refinery 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 anode-grade petroleum coke. Refined petroleum products are primarily distributed to customers throughout the Midcontinent region by company-owned and common carrier pipelines.

Billings Refinery

The Billings Refinery is located in Billings, Montana. Refinery 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 fuel-grade petroleum coke. Refined petroleum products are distributed to customers in Montana, Wyoming, Idaho, Utah, Colorado and Washington by pipeline, railcar and truck.

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 produced include residual fuel oil, which is supplied to the northwest marine bunker fuel market. Most of the refined petroleum products are distributed to customers in the northwest United States by pipeline and barge.

Los Angeles Refinery

The Los Angeles Refinery consists of two facilities linked by pipeline 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. Refinery 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 produced include fuel-grade petroleum coke. Refined petroleum 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 our pipelines. The Santa Maria facility is located in Arroyo Grande, California, 200 miles south of San Francisco, California, while the Rodeo facility is located in the San Francisco Bay Area. Intermediate refined products from the Santa Maria facility are shipped by pipeline to the Rodeo facility for upgrading into finished petroleum products. Refinery 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, including CARB-grade gasoline. Other products produced include fuel-grade petroleum coke. The majority of the refined petroleum products are distributed to customers in California by pipeline and barge. Additionally, refined petroleum products are exported to customers primarily in Latin America by waterborne cargo.

Renewable Fuel Projects

We are developing renewable fuel projects that leverage existing infrastructure. Waste fats, recycled cooking oils and other renewable feedstocks will be used for diesel production that complies with low-carbon fuel standards. We have a renewable diesel project underway at the Humber Refinery, and we are developing a renewable diesel project at the San Francisco Refinery. Additionally, we have supply and offtake agreements for two third-party renewable diesel facilities under construction in Nevada.

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.

Marketing

Marketing—United States

We market gasoline, diesel and aviation fuel through marketer and joint venture outlets that utilize the Phillips 66, Conoco or brands. At December 31, 2019, we had approximately 7,540 branded outlets in 48 states.

Our wholesale operations utilize a network of marketers operating approximately 5,450 outlets. We place a strong emphasis on the wholesale channel of trade because of its relatively lower capital requirements. In addition, we hold brand-licensing agreements covering approximately 1,280 sites. Our refined petroleum 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 networks 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 monthly fee.

In the Gulf Coast and East Coast regions, most sales are conducted via the unbranded channel of trade, which does 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 aviation gasoline and jet fuel. Aviation gasoline and jet fuel are sold through dealers and independent marketers at approximately Phillips 66 branded locations.

In the fourth quarter of 2019, we formed a retail marketing joint venture with operations primarily on the U.S. West Coast. The joint venture operates a network that includes approximately 580 outlets. This joint venture enables increased long-term placement of our refinery production and increases our exposure to retail margins.

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, we have an equity interest in a joint venture that markets refined petroleum products in Switzerland under the COOP brand name.

We also market aviation fuels, LPG, heating oils, marine bunker fuels, and other secondary refined products to commercial customers and into the bulk or spot markets in the above countries.

At December 31, 2019, we had 1,280 marketing outlets in Europe, of which were company owned and were dealer owned. In addition, we had interests in additional sites through our COOP joint venture operations in Switzerland.

Specialties

We manufacture lubricants and sell a variety of specialty products, including petroleum coke products, waxes, solvents and polypropylene.

Lubricants

We manufacture and sell automotive, commercial, industrial and specialty lubricants which are marketed worldwide under the Phillips 66, Kendall,Red Line and other private label brands. We also market Group III Ultra-S base oils through an agreement with South Korea’s S-Oil Corporation.

In addition, we own a 50% interest in Excel Paralubes LLC (Excel), an operated joint venture that 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 Group II clear hydrocracked base oils. Excel markets the produced base oil under the Pure Performance brand. The facility’s feedstock is sourced primarily from our Lake Charles Refinery.

Other Specialty Products

We market high-quality specialty 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. In addition, we market sulfur for use in agricultural and chemical applications, and fuel-grade petroleum coke for use in the making of cement and glass, and generation of power.

RESEARCH AND DEVELOPMENT

Our Technology organization, located in Bartlesville, Oklahoma, conducts applied and fundamental research to support our current business, provide new environmental solutions, and provide options for future growth that are aligned with the Phillips 66 strategy. Technology programs include monitoring the quality of crude being processed; development and optimization of catalysts; modeling to anticipate corrosion and fouling rates in the refinery units; and modeling to increase product yield and reliability. Our Energy Transition group currently is developing organic photovoltaic polymers, solid oxide fuel cells, and battery materials while the Sustainability group continues to model air chemistry and water cleanup. Research continues on emerging renewable fuels processes, and a robotics program was introduced in 2019 to identify ways to use robots to do work that involves exposure to hazardous chemicals or working environments, or work that is considered highly repetitive. Additionally, we monitor the global research and development community for technologies that could impact our business.

COMPETITION

In the Midstream segment, our crude oil and products pipelines could face competition with other crude oil and products pipeline companies, major integrated oil companies, and independent crude oil gathering and marketing companies. Competition is based primarily on quality of customer service, competitive pricing and proximity to customers and market hubs. In addition, 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 largest U.S. producers and marketers of NGL, based on published industry sources, and one of the leading natural gas gatherers and processors in the United States based on wellhead volumes. 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 in many of its major product lines according to published industry sources, based on average 2019 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, ability to run advantaged feedstocks, 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, 2019, we held a total of active patents in countries worldwide, including active U.S. patents. The overall profitability of any business segment is not dependent on any single patent, trademark, license or franchise.

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 2019 and those expected for 2020 and 2021.

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.

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