* Refineries, ports and pipelines shut down ahead of storm
* Traders eye lower fuel demand as transport hit
NEW YORK, Oct 30 (Reuters) – U.S. refinery and pipeline
companies that nearly halted East Coast fuel supplies ahead of
Hurricane Sandy will begin assessing the storm’s damage on
Tuesday, hoping that their flood defenses and on-site power
allow a quick return to service.
Three of the area’s six key refineries — including the two
largest — effectively shut down operations in advance of
landfall Monday evening for the Atlantic storm. Two more reduced
operating rates, curtailing at least two-thirds of the region’s
capacity.
Major ports that supply the area with some 1 million barrels
per day (bpd) of imported fuel were also shut, while the
northern leg of the Colonial Pipeline from the Gulf Coast was
idled. It supplies as much as 15 percent of the East Coast’s 5.2
million bpd of gasoline, diesel and fuel demand.
As Sandy’s up to 90 mile per hour winds slow over land and
its 13-foot storm surge subsides, operators such as Phillips 66
and PBF Energy will assess any damage to their
facilities, and start making plans for restoring operations – a
delicate process in the best of times.
If damage is limited, many experts say fuel supplies should
resume within a few days, potentially reversing the three-day, 6
percent rally in benchmark New York harbor gasoline futures
as traders shift their focus from the threat of a supply
squeeze to the loss of demand from airport and road closures.
“Markets have already bumped up prices to some degree. If
there’s no major catastrophes then prices are going to go in the
other direction,” said John Auers, senior vice president and
refining specialist at Turner, Mason & Co. in Dallas.
He said that the East Coast plants, even those near the
water, are better protected from potential flood damage than
those that suffered weeks-long outages on the Gulf Coast
following Hurricanes Katrina and Rita seven years ago.
But even well-prepared plants can face problems. Two months
ago Phillips 66, which reported a power outage at its
238,000-bpd Bayway, New Jersey, refinery on Monday, was forced
to clear more than two feet of floodwater from its Alliance,
Louisiana, refinery following Hurricane Isaac, delaying its
restart.
“Bayway is probably the most exposed as it sits right out by
the water and it’s certainly in the path of the storm,” said
Matthew Partridge, downstream analyst at Wood Mackenzie in
Houston. He said plants should be up “within a few days” if they
escape damage, although it was too early to give an assessment.
Most refineries have some on-site generation equipment that
could help restore operations if there are power outages.
Phillips 66 did not immediately respond to an email seeking
further details on the Bayway outage.
The largest risk may simply lie in restarting vast, intense
equipment after a brief shutdown.
“You’re talking about heating up oil to fairly high
temperatures, putting it through processing units at high
pressure,” said Auers. “Anytime you interrupt that steady-state
there is always the potential for issues.”
For a FACTBOX on operations see:
SUPPLIES STRETCHED, BUT DEMAND WEAK
Oil traders were already beginning to reconsider the run-up
in fuel prices ahead of the storm. RBOB gasoline futures slipped
0.8 percent in overnight trading, the first loss in four days.
One trader offering to sell physical cargoes in the New York
harbor market found no buyers on Monday.
That’s despite the fact that fuel stockpiles — heating oil
in particular — are unusually low for this time of year.
While awaiting news on fuel supplies, oil traders began
totting up the impact on demand.
Airlines had canceled more than 13,700 flights for Sunday,
Monday and Tuesday, including more than 7,600 for Monday alone,
Flight-tracking service FlightAware said. Road travel ground to
a halt, with major bridges and tunnels shut down. Marine traffic
at some of the nation’s busiest ports was halted.
“The flip side is demand is going to be a lot lower this
week, as not many people are going to be out there driving,”
said Partridge. “If this number of refineries went offline
during the summer driving season gasoline prices would go
through the roof.”
The precautionary refinery closures are more widespread than
during Hurricane Irene in August 2011, when only the Bayway
plant shut completely.
Philadelphia Energy Solutions began the precautionary
closure of key units at its 330,000 barrel-per-day (bpd)
Philadelphia refinery, the biggest in the region.
Hess Corp said it shut its 70,000-bpd refinery in
Port Reading, New Jersey, while PBF Energy opted to reduce rates
at its 180,000-bpd Paulsboro plant in southern New Jersey, and
its Delaware City facility.
Delta Air Lines’ Monroe Energy said it was
monitoring the storm, but did not anticipate altering operations
at its 185,000-bpd plant in Trainer, Pennsylvania, which has
only recently returned to service after major maintenance.
Even if the refineries escape unscathed, however, any damage
to the vast network of oil terminals, pipelines and truck racks
could complicate supply logistics.
NuStar Energy and Magellan Midstream Partners
, two of the biggest players in the nation’s pipeline and
storage terminal business, also shut terminals along the East
Coast.
“As a result, the distribution infrastructure, including
pipelines and refined product terminals are extremely important
and could hamper recovery efforts if significant amounts of this
infrastructure is damaged,” said Roger Ihne, principal in the
oil and gas practice at consultancy Deloitte.
