Fuel Retailers Face Challenge to Supply Stores as Sandy Nears

Northeast fuel retailers and distributors are working to keep fueling stations stocked with gasoline and diesel as refineries, pipelines and distribution terminals shut for Hurricane Sandy.

Phillips 66 closed three storage terminals in New York and New Jersey and has idled its 238,000 barrel-a-day Bayway refinery in Linden, New Jersey, the company said today. Colonial Pipeline Co. began shutting delivery lines along the East Coast as terminal customers in Virginia, Maryland, New Jersey and New York halted operations. Colonial’s Line 3, an 825,000-barrel-a- day fuel pipeline running from North Carolina to New Jersey was expected to shut later today.

“Wholesale rack closures have presented a challenge to keep retail stations supplied,” said Brian Schaller, senior director of fuel at Wawa Inc., a Pennsylvania-based a gasoline retailer. “We’ve managed without significant interruptions.”

Hess Corp. (HES) shut its Port Reading refinery in New Jersey. Philadelphia Energy Solutions’ Philadelphia plant and PBF’s Delaware City, Delaware, and Paulsboro, New Jersey, refineries are operating at reduced rates, the companies said.

Colonial shut its delivery lines running from Linden, New Jersey, to terminals around New York Harbor. The company’s line delivering to Buckeye Partners LP (BPL)’s pipeline system was expected to shut after 5 p.m., Steve Baker, a company spokesman, said.

New York, New Jersey and Delaware Bay ports were closed to vessel traffic by the U.S. Coast Guard, halting tanker deliveries that help supply the region’s refineries with crude oil. There are seven plants in the area with a combined capacity of about 1.29 million barrels a day, according to data compiled by Bloomberg.

Fuel Terminals

“The biggest impact on the East Coast is probably not going to be the result of the refineries shutting down,” said Roger Ihne, principal in the oil and gas practice at Deloitte Consulting LLP in Houston. “The amount of refined products that are consumed on the East Coast is about 30 percent of the total U.S. but it only has about 9 percent of the refining capacity.”

Sustained damage to pipelines, terminals, and other Northeast fuel distribution systems could have a larger effect on pricing and potential supply disruptions, according to Ihne.

Kinder Morgan Energy Partners LP (KMP) shut oil terminals in Philadelphia, Perth Amboy and Carteret, New Jersey and Staten Island, New York, Joe Hollier, a company spokesman, said in an e-mail.

“We are working pretty hard to make sure the systems are operating appropriately,” said Grant Brown, a spokesman at Sprague Energy Resources LLC in Portsmouth, New Hampshire, one of the largest independent wholesale fuel terminal owners in the Northeast. “We don’t forsee any disruptions in the supply network.”

Sprague’s Avery Lane asphalt terminal in Newington, New Hampshire lost power, he said.

“It’s getting more and more difficult as the day goes on because fuel distribution terminals are shutting due to the water level,” said Joanne Conley, president of Newburgh, New York-based Warex Terminals Corp. “We are going to make all the deliveries as long as we can get fuel and as weather permits.”

To contact the reporters on this story: Aaron Clark in New York at aclark27@bloomberg.net; Christine Harvey in New York at charvey32@bloomberg.net; Joshua Falk in New York at jfalk19@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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