Big Oil Turns to the Energy Stockpile
From Platts Oilgram News
The U.S. has opened its emergency energy stockpile, and big oil outfits have come calling. On Sept. 1, ExxonMobil (XOM ) was granted a whopping 6 million barrels of crude from the Strategic Petroleum Reserve (SPR) for its Baton Rouge (La.) refinery, the Energy Dept. Spotlighting the widening impact of Hurricane Katrina, Valero Energy (VLO ) said it would ship government crude to refineries in Tennessee and Ohio.
BIG SPR LOAN.
The DOE also said on Sept. 1 that it granted a 1 million barrel oil loan to Placid Refining for its 50,000 barrels per day (b/d) Port Allen (La.) plant. The number of shuttered refineries from Katrina stands at nine, totaling 1.8 million b/d of throughput or about 11% of total U.S. refining capacity, American Petroleum Institute CEO Red Cavaney told a press briefing.
He noted another 12 plants as far north as Whiting, Ill., have told API of run cuts due to lack of crude supply. They total another 17% of U.S. nameplate capacity but may be still running at only two-thirds of their 2.8 million b/d of capacity for an overall drop of some 15% in U.S. refining capability.
ExxonMobil's SPR loan, 3 million barrels of low-sulfur "sweet" crude and 3 million barrels of the higher-sulfur, "sour", grade, could be delivered as early as Sept. 2, Energy Secretary Samuel Bodman said in a statement, adding that the DOE continues to review SPR loan requests. ExxonMobil's loan was the largest ever SPR award to a single company. The oil will be loaned under "short-term contractual agreements and returned to the emergency crude stockpile once supply conditions return to normal," DOE said. The agency gave no other details (see BW Online, 9/1/05, "Feeding the Oil Monster with a Dixie Cup").
FEEDING THE COLONIAL PIPELINE.
These loans are repaid not in cash but in black gold. The DOE garnered an extra 234,200 barrels of sweet crude in "interest" on its post-Hurricane Ivan SPR loans. According to the Ivan contracts, obtained by Platts through a Freedom of Information Act request, the government demanded a volume premium of 1.8% to 5.6% on 5.4 million barrels of sweet-crude loans to five refiners, to be repaid in three to six months.
ExxonMobil plans to run the SPR barrels at its 493,500 b/d Baton Rouge plant. The company said this week it is running Baton Rouge at unspecified reduced rates due to problems getting crude. The ExxonMobil-PDVSA Chalmette refining plant (187,000 b/d) remained shut since Aug. 28. The giant's Texas refineries at Baytown (557,000 b/d) and Beaumont (348,500 b/d) continued to run normally, the company said.
Valero was granted 1.5 million barrels of SPR crude for two of its newly acquired Premcor refineries at Memphis, Tenn. (190,000 b/d), and Lima, Ohio (170,000 b/d). But it noted power is restored at its 190,000 b/d St. Charles refinery at Norco, La. Valero will also use SPR crude at its 85,000 b/d Krotz Springs (La.) refinery. Krotz Springs is now running at 48,000 b/d due to pipeline problems. The plant feeds product to the Colonial Pipeline, the largest U.S. pipeline carrying gasoline and other refined oil products from the Gulf Coast.
RAMPING UP PRODUCTION.
Valero's Lima (Ohio) refinery, which runs light sweet crude, is between Toledo and Dayton and gets both foreign and domestic crude via pipeline. It makes 25% of the gasoline used in Ohio, according to Valero. The SPR crude "should allow these refineries to ramp up to full rates by late this weekend," said Valero in an e-mail to Platts. The Capline outage caused Marathon Oil to cut runs at its 222,000 b/d Catlettsburg (Ky.) and 192,000 b/d Robinson (Ill.) plants, the company said.
Catlettsburg produces nearly 2% of U.S.-made gasoline, the company says, running both sweet and sour crude. Marathon's 245,000 b/d Garyville (La.) refinery "appears" to have experienced "minimal impact" from Hurricane Katrina, said a spokeswoman: "The refinery was not flooded during the storm."
Inspections continue at Garyville, and power was restored Aug 31. Work has begun to restart boilers and charge key processing units with feedstock, the spokeswoman added. The refinery, she said, could ramp up fuel production within three to five days, depending on other utilities.
On the marketing side, Marathon said it is supplying contracted volumes to its own brand and contract customers. "However, as a result of Hurricane Katrina and the reduced operations at the Garyville refinery and certain Midwest refineries, the company is not able to fully supply noncontracted [spot market] customers at this time," it said. Marathon has not sought SPR crude, said a spokeswoman.
Shell (RD ) said it could begin restart of the 235,000 b/d Motiva Enterprises refinery at Convent (La.) in about one week, a company spokeswoman said, but the company's 220,000 b/d Norco refinery "is still assessing damage." Access there was "limited, but improving." She also said the refinery's nearby substation has power, but not the plant.
Motiva distribution terminals at Kenner, La., and Collins and Meridian, Miss., remained closed late Aug. 31 due to flooding and power outages, the company said, but its Convent terminal was operating. Shell also reported its Motiva affiliate continued to assess damage to its Shell-branded retail sites.
Chevron (CVX ) said a dike built after Hurricane Georges in 1998 prevented "catastrophic damage" to its 325,000 b/d refinery at Pascagoula, Miss., from Katrina. A spokesman would not detail damage to the plant. He said some power was restored Aug. 31 from emergency generators. The spokesman also said Chevron was building a tent city at Pascagoula for 1,500 people, including refinery workers and their families (see BW Online, 9/1/05, "What About the Gulf's Oil Workers?").
"MORE LASTING IMPACT."
Murphy Oil said on Sept. 1 that some flooding occurred at its 125,000 b/d Meraux (La.) refinery. "While repair to part of the plant's electrical equipment and instrumentation, as well as a general cleanup of the facility, will be necessary, the refinery appears to have sustained no major damage from the storm," Murphy said: "No estimate can be provided regarding timing of startup."
Hurricane Katrina is likely to have a "more lasting impact on refinery production and the distribution system" in the U.S. than did last year's Hurricane Ivan, the U.S. Energy Information Administration reported on its Web site Sept. 1. The EIA said while some U.S. Gulf Coast refineries will likely be able to restart within the next two weeks, "others will likely be down for a more extended period, possibly several months."