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Philly-Area Refinery Closures Would Be Severe Hit

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This topic contains 5 replies, has 1 voice, and was last updated by  Charles Randall 9 years, 4 months ago.

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  • #2111

    basil parmesan
    Participant

    Philly-Area Refinery Closures Would Be Severe Hit

    Oct 4, 2011 /The Philadelphia Inquirer/ PHILADELPHIA Analysts say the potential closure of three Philadelphia-area oil refineries by next summer if they fail to find buyers could have a severe impact on commerce on the Delaware River.
    Philadelphia-based Sunoco Inc. says it is getting out of the refining business and plans to sell its refineries in Philadelphia and suburban Marcus Hook, and ConocoPhillips is seeking a buyer for its oil refinery in nearby Trainer.
    Elected leaders and union officials have said they are optimistic that buyers can be found but if they cannot, analysts tell The Philadelphia Inquirer that the results could be staggering.
    Closures would mean the end of 2,000 refinery jobs. But that would also reduce work for contractors, river pilots, ship agents and other workers, not to mention suppliers, engineers, restaurants and taprooms.

  • #4906

    Charles Randall
    Participant

    Here is update on East coast Refinery sales / closures. If PBF had not just purchased both Valero Delaware (Fluid Coker) and NJ Paulsboro (delayed coker) Refineries – they would be idled/closed or terminals by now as well. Sunoco has also idled its Westville NJ Refinery (simple-noncoker).

    Both the East Coast and West Coast anti-manufacturing and anti-oil industry positions with harsh regulations and fines will continue to increase the concentration of Gulf Coast US Refining industry & its impact when regional storms reduce capacity. The high additional gasoline cost differential for California gasoline regulations is over $1.20/gallon (without any additional profit motive for refiners) and both regions attitudes are responsible for exodus of major oil companies recently. They will be good example to the other 39 states in the US that have little or no refining capacity and rely on pipeline and import supplies to meet demand – very exposed position for crisis, natural disasters & Pipeline failures.

    The 3 coastal sectors were home to the 7 states that produce 75% of total US Refinery fuel products and crude processing.

    Nimby Environmental regulations and specifications run amuck will yield natural result with increasing cost and shortages to justify wholesale switch to Electric cars before the technology is commercially ready even with heavy subsidy. Even then, the US electrical system is not financially/commercially infrastructure-wise prepared to provide substations for home and road refuel sites, nor the power given the same anti-fossil focus for coal which is 60% of current US power (logical given we are Saudi’s of Coal reserves).
    Regards

  • #4896

    Charles Randall
    Participant

    Heating oil sulfur rules doom refineries -Campbell

    Tue Oct 11, 2011 12:54pm EDT
    — Robert Campbell is a Reuters market analyst. The viewsexpressed are his own. — By Robert Campbell
    NEW YORK, Oct 11 (Reuters) – New curbs on sulfur content inheating oil in several Northeastern U.S. states are a majorfactor behind the impending closure of as many as threeregional oil refineries. From the middle of next year, heating oil sold in New Yorkstate will be restricted to a sulfur content of 15 parts permillion, down from today’s 2000 ppm specification. This means that in New York, heating oil, a formerly easyproduct to make, will become very similar to ultra-low sulfurdiesel, a more costly product. Other jurisdictions are set to follow later, but New Yorkstate’s early move may prove decisive for the whole market.

    Although heating oil is a declining market as consumersswitch to natural gas, it has played a key role forcash-strapped refiners as a dumping ground for higher sulfurdistillate streams that can no longer find a place in thediesel pool. Nearly 40 percent of East Coast refiners’ distillate fueloutput last year was high sulfur. Without investments indesulfurization capacity to upgrade these streams, refiners arefacing a big hit to profitability.

    So as the heating oil specifications tighten, tens ofmillions of dollars in investment will be needed just to stayin business. Of course today the three refineries up for sale –twoSunoco Inc plants in the Philadelphia area and a nearbyConocoPhillips facility– are already losing money, sothe new investment would merely allow them to continue losingmoney at roughly the same pace as today.

    Currently Sunoco’s two refineries do not have any dieseldesulfurization capacity, according to the U.S. government.Some other units may be suitable for conversion to dieseldesulfurization. Conoco’s refinery has some diesel desulfurization, but lessproportionally than other sweet crude oil refineries,suggesting that it too would need investment.

    So anyone buying either of these refineries would have tobe ready to continue to absorb the current rate of losses,invest in new desulfurization capacity and be prepared to dealwith the gradual decline in U.S. oil demand and ever morecostly light, sweet crude.

    Impossible? No, nothing is impossible. But what is all butcertain is that at least two of these refineries will close.After all there can only be a few buyers brave, or foolhardy,enough to try to turn these plants around.

    NEW YORK LEAD
    The real problem is the New York deadline. Oil refinershave warned it will cause them problems, prompting somejurisdictions to slow down their transition plans. But though some states, such as New Jersey, have opted fora more gradual transition, the market is aiming for a fastershift. Critically, major pieces of infrastructure are jumping thegun. The Buckeye Partners LP pipeline, a major regionalshipper, will restrict sulfur in heating oil in parts of itssystem from April.

    Although higher sulfur heating oil will remain deliverablein other parts of the Buckeye system, past experience showsthat lower sulfur specifications tend to crowd out other gradesas infrastructure operators try to keep operations simple. Given these challenges it is hard to see buyers for thethree refineries up for sale or closure emerging. Even PBF Energy, Tom O’Malley’s latest contrarian refinerybet, is unlikely to step in. After all, having bought two EastCoast refineries at knock-down prices he has the most to gainif his competitors go out of business.

    And he has his own problems. O’Malley told Platts inSeptember that neither of his two East Coast refineries canmake heating oil able to meet the stringent specifications setto go into effect in New York. Upgrading the two plants could cost $700 million and takeuntil 2015, Platts reported. It would be too big of a stretch to blame the heating oilrules for these potential closures. At best they have onlyaccelerated an inevitable process. Other public policies, such as mandatory biofuels blendsand higher fuel economy ratings for passenger cars, are doingmore to kill off refineries. But the heating oil question does highlight risks forrefiners. Once heating oil joins the low sulfur club, jet fuelmay be similarly targeted. New rules due to be fully implemented by 2015 ban highsulfur bunker fuel in ships in most North American waters. Indeed, these changes are not invisible to refiners but, atleast on the East Coast, many chose to not upgrade theirfacilities due to cost considerations. The market will now pay the price for these decisions inhigher cost fuels.

  • #4895

    Charles Randall
    Participant

    Here is good insight into faster paced sale/closure pace of US East Coast refineries – new Heating oil specs and lack of EC refineres Desulfurizing units.

    It puts higher hurddle level on sale these plants and lower one on closing them / converting to terminals in short term …… at least until East Coast folks
    start stacking traffic trying get few stations that have supply in next storm / power outages.

    Also makes clear that $650-700MM unit for Omalley’s Delaware expansion is going be HDS type units and not delayed coker addition.
    Regards

  • #4794

    Charles Randall
    Participant

    Closing Refineries could lead $4 gas
    Bloomberg News Dec 22, 2011

    Gasoline prices may rise above $4 next summer if three Philadelphia area refineries close, reducing capacity, said Edward Morse, New York-based head of commodities research at Citigroup.

    Sunoco Inc. and ConocoPhillips have idled two plants in Marcus Hook and Trainer, and Sunoco plans to shut the Philadelphia refinery by July if a buyer isn’t found. Together, the plants account for about half of U.S. East Coast refining.

    “One of the things that’s lurking in the marketplace is the consequence of this shutting in of about 700,000 barrels a day of East Coast refineries,” Morse said in a Bloomberg TV interview.

  • #4793

    Charles Randall
    Participant

    Here is update on East Coast Refinery Closures by Bloomberg – evidently they did not get news Sunoco moved up July 2012 closure to Dec 2011 6 months earlier.

    The $4 gasoline/fuels estimate would be min – much more likely they will be paying the $0.90-1.50/gal premium that West Coast now pays for its over regulated specifications and anti Oil industry posture that is closing refineries & stripping economics away there. The East Coast will leap ahead of this premium because its already at 50%+ closure rate and going to be dependent on Pipelines or imports (from countries that have +$8/gal fuel values).

    The cost hit will likely be moderated by current US under utilization of refining capacity (~80-85% of “Operable” Capacity) and weak demand due high unemployment rates.

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