View Full Version : Grim Outlook for 4 Gulf Coast Refineries

09-05-2005, 12:05 AM
Grim Outlook for 4 Gulf Coast Refineries
Sunday September 4, 9:17 pm ET
4 Gulf Coast Refineries, Which Process 5 Percent of U.S. Fuel Capacity, May Be Shut for Months

NEW YORK (AP) -- The U.S. refinery system struggled back Sunday from Hurricane Katrina, with two storm-shuttered facilities restarting and flows of crude oil improving enough to allow refineries in the Gulf Coast and Midwest to ramp up production.

But four damaged Gulf Coast refiners look likely to remain shut for weeks or even months, taking with them more than 5 percent of U.S. capacity.

Hurricane Katrina has pinched U.S. fuel supply, causing spot shortages and price spikes throughout the country. The storm shut eight major refineries and caused 12 others to run at reduced rates when their crude-oil supplies were cut.

Louisiana refineries expect to be back running within the week. Motiva Enterprises has begun to restart its 235,000 barrel a day Convent, La., refinery. Motiva is a joint venture of Royal Dutch Shell PLC and state-owned Saudi Arabian Oil Co.

"The Motiva Convent Refinery has completed repairs and initiated its restart sequence," Shell said on its Web site.

The refinery is the second to restart after Hurricane Katrina. Marathon Oil Corp. restarted its 245,000 barrel a day Garyville, La., refinery last week and expects the facility to be operating at full capacity Monday.

The two refineries in Norco, La., about 25 miles west of New Orleans, may also restart this week: Motiva's 225,000 barrel a day Norco refinery and Valero Energy Corp.'s St. Charles refinery in Norco.

The prospects for the other four refineries that shut down ahead of the storm are more dire. The plants, in hard-hit areas southeast of New Orleans and in Mississippi, can process some 880,000 barrels a day of crude, more than 5 percent of total U.S. capacity.

Chevron Corp.'s 325,000 barrel a day Pascagoula, Miss., facility and ConocoPhillips' 255,000 barrel a day Alliance refinery in Belle Chasse, La., have suffered "major damage," the Energy Department said.

Murphy Oil Corp.'s 120,000 barrel a day Meraux, La., refinery and the 183,000 barrel a day refinery at Chalmette, La., owned by ExxonMobil and Petroleos de Venezuela SA, suffered water damage, the DOE said. Murphy has said the flooding is a few feet deep.

"There's still some water in the plant," Murphy spokeswoman Mindy West said Sunday. Once the water is out, Murphy will have to clean out units and repair electrical equipment, West said. She wouldn't say when Murphy expects to complete those procedures.

The Chalmette refinery continues to assess damage, spokeswoman Nora Scheller said Sunday. There is no thought yet of a restart timetable, she said.

Outside the main hurricane-struck region, refining conditions were improving. Ten refineries in the Midwest and Gulf Coast were operating at higher rates Sunday after receiving crude oil from the key Capline Pipeline and from the Strategic Petroleum Reserve, the Energy Department said.

The refineries ramping up operations this weekend include ExxonMobil's giant 494,000 barrel a day Baton Rouge facility; Total SA's 212,000 Port Arthur, Texas, facility; ConocoPhillip's 239,000 Lake Charles facility; and Marathon's 222,000 Catlettsburg, Ky., facility, which may be at full capacity Monday, the DOE said.

The facilities weren't directly affected by the storm, but saw their supplies dwindle as Katrina cut power to pipelines and closed the Mississippi River. The river is now open to oil tankers up to Baton Rouge, though transits are only one way and restricted to daylight hours.

Also improving crude-oil supply, the Louisiana Offshore Oil Port, the key facility for offloading and distributing imported crude oil on the U.S. Gulf Coast, said Saturday it is able to operate at about 75 percent capacity after power was restored at its Clovelly, La., storage facility. Deliveries of crude oil to the Capline Pipeline supplying refineries in the Midwest should begin Sunday.

Nevertheless, spot shortages of fuel continue to be reported in the United States, and the system is expected to remain tight until all refineries are healthy again. U.S. inventories of gasoline were 7 percent below last year even before the storm hit, according to the Energy Information Administration, the statistics arm of the Energy Department.

Unfortunately, this is one half of the economic pain to be felt by all.

As refineries were already running near capacity, the hiccup in the system will continue to hurt consumers of refined goods far beyond just the recent and sharp spikes in prices.

The other half being huge insurance premium increases across the board on every type of insurance over the next few years.

Just when my insurance broker stopped blaming 9/11 now he has a new excuse :roll:

09-05-2005, 12:10 AM
Probably be looking at at least $80 dpb by the end of the year.

However, it may be a good thing and finally urge people to conserve.

09-05-2005, 10:46 AM
Probably be looking at at least $80 dpb by the end of the year.

However, it may be a good thing and finally urge people to conserve.

You could be right, but I wouldn't think the production of gas would be related to the production and delivery of crude and their individual spot prices respectively. I'm no economist but one would think the two aren't related. I stand by to be corrected and enlightened.

09-05-2005, 11:47 AM
Probably be looking at at least $80 dpb by the end of the year.

I surely hope so.

09-06-2005, 04:23 AM
Early expectation for price to rocket, but on Monday (5 September 2005), oil price dropped almost $1. The market will remain calm for now, with the opening of the national reserve and IEA members releasing 2,000,000 bpd for the next 30 days from their reserves to the U.S., along with the drop in the expected number of travel plans during this holiday and if SUV sales continue to drop at the current pace, this might turn out to be a good opportunity for price to attain an equilibrium. When the price increase pick up again, it will be less substantial then the initial prediction.

09-06-2005, 08:03 AM
Probably be looking at at least $80 dpb by the end of the year.

However, it may be a good thing and finally urge people to conserve.

You could be right, but I wouldn't think the production of gas would be related to the production and delivery of crude and their individual spot prices respectively. I'm no economist but one would think the two aren't related. I stand by to be corrected and enlightened.

My personal understanding( and I could very well be wrong) is:

The global logistics of the Oil industry ARE related in that it would be inefficient to have TOO much "work in progress" like unrefined crude oil sitting around to be refined into finished goods(like unleaded gasoline).

It's a great idea to have SOME to help cushion bottlenecks and production inefficiencies...but the industry as a whole is NOT as efficient as say Dell computer's supply chain with only a couple days worth of raw materials max on hand in inventory.

My understanding is that the US Strategic Reserves consist of UNREFINED oil. IF that is the case, the announced release of the SR could only be for PR purposes.

We could have all the raw material in the world, but it does us no good in it's unrefined state.

For the better part of 2005 GLOBAL refinery capacity has been creeping towards 100%. There's just no excess capacity to be found anywhere.

Profits are fantastic(good news)........but ANY impact to existing refinery capacity can have major consequences by temporarily upsetting the supply/demand apple cart(bad news).

Combine lower refined inventory compared to this time last year with no extra buffer in refinery capacity as the Gulf refineries recover from the recent damage and we MAY have a big spike, NOT in crude oil futures, but in unleaded and heating oil futures.

Crude, unleaded, and heating futures tend to track in tandem. My hunch, and some money, is riding on crude settling a bit as we face no immediate crude supply issues, but heating oil and unleaded gasoline futures in particular spiking as refined inventories continue to drop, the refinery hiccups bite a bit, and speculation increases.

My guess is we're looking at 6-9 months worth of further price pain to be felt by all as well as announcements of either NEW refineries or plans for expanded capacity ramrodded through.......but not online for several years.

Again, just my .02c, but I've spent a considerable amount of time researching energy commodities for the last couple of months and I'm left with a short-to-medium term opinion that is quite negative for Joe Consumer if accurate.

Jim Rogers has a career batting average approaching that of Warren Buffett and his predictions have been scary spot on.

If you get the chance, his books on investement are by far the best I've ever read(particularly considering he called this commodity boom with razorsharp accuracy about 10 years ago)...AND he's a motorcyclist to boot. ;)

09-06-2005, 08:31 AM
Governments and oil companies have been warned for years. Increase the refinery.

Whats the point in drilling 100 barrells of oil if you can only refine 40 barrells of oil?

Thats what is causing the increase in prices. Not any shortage of the black stuff.

Read Hot Commodities by Jim Rogers...well worth the read.

5 years ago the price of oil was in the toilet.

NO oil company in their right mind was keen to build a refinery then....they were suffering breakeven or bleeding capital since they were practically giving the prodcut away at the then market price.

Fast forward 5 years, add the steady needs of growing western economies with the exploding energy needs of developing nations like China and India and market prices have increased 400%.

It IS in oil companies best interest to fulfill customer demand........because if prices climb too high......the air comes out of the global economic boom and everyone, even the oil companies suffer.

So they are in panic mode to increase refinery capacity, but who wants a refinery in their backyard?

Nobody in the wealthy west.....but that begins to change when soccer moms are paying 5 bucks a gallon to fill the SUV...but by then it's too late.

By the time consents for new refineries are acquired, construction begins, and the refinery comes on line....it's now 2010 :roll:

Could the big oil companies have build additional capacity in the last few years...quite possibly, but the hurdles put in place are actually quite high to do so........if you keep up with the business section of the paper or net, you'll notice that merger activity is at an all time high in the energy sector.

It's cheaper and easier to buy someone else's refining capacity than to take on the hassle of starting from scratch..let some other company worry about it :lol:

09-06-2005, 01:36 PM
A) No refineries have been built since the 70s.

B) A single refinery has been going through the process but has taken years in paper work alone.

C) No one wants a refinery near them (we had one near my farm and it let out something like 130 MILLION gallons of pollutants into the ground water, ruining the local drinking water AND wildlife in the river running next to it).

D) EPA laws heavily restrict/prevent a refinery from being built.

E) Most of the refineries are located in two geographical locations (South and South West)

F) Refining petroleum is the least profitable part of the oil to market process.

G) In a demand economy its better not to have more refining capacity....this is, after all, capitalism at its core.

A lot of things to consider, both pro and con. Its not a simple thing to say "just build more".

The problem is that the we look at this as a national problem because we rely so heavily on it. The oil industry has in many ways created the problem through special interest control over legislation and alternative energy research. They have created an environment where we will need to start regulating them to avoid a national economic disaster.

The devil in me says let the prices get as high as they can, then, and only then will Americans actually start thinking about alternatives, both in fuel and energy types as well as their own personal consumption.

09-06-2005, 03:24 PM
Word, my bmx looks better everyday :lol:

09-06-2005, 03:58 PM
Word, my bmx looks better everyday :lol:

word brotha. I'm happy beyonf words that I am now 4 miles from work and 5 miles from school. the increase in rent was outweighed by the increase in gas prices...