Philadelphia Energy Solutions seeks to permanently shut oil refinery - sources

[ceo_energemsier + 1,818]

44 minutes ago, Ward Smith said:

The question one should ask is why are 100+ year old refineries in operation at all? Would you want to drive a 100 year old car, at 100 mph? 

The answer, sadly is that our fine environmental protection agency is squarely to blame. I personally know a gentleman advising a group, who are fully funded to build a refinery. They found the site, they have the plans, they have the money. What they Do Not have is the EPA approval. Getting the permits to "pollute" the air, as any refinery will is virtually impossible, even with Trump valiantly bringing in his sword to cut down red tape. 

I wish I could track down the article, which I believe was in Hydrocarbon Processing or Chemical Engineering magazine where an executive bemoaned the difficulty in getting approvals. That's the value in old refineries, it's called getting grandfathered in. So a Whiting refinery (built in 1889) isn't building anything "new", they're just "adding capacity" to existing delayed cokers. That 102k daily capacity (2nd largest in world when installed) has allowed them to capitalize on that dirty cheap Canadian bitumen since 2014 when it came online. Of course that capacity came at a price, some $4 billion or so. 

It's undoubtedly cheaper, more effective and less polluting to start with a brand new design. The deep state bunglecrats won't ever make that determination, they're just too married to their tried and true levels of incompetence and petty power games. 

The permitting process is very tedious and difficult, very expensive and time consuming. One of the refineries I have been working on, for a long long time, has taken over 7 years and 3Xtens of millions of $$$ in getting things together to get EPA and State EPA air permits.

This PES refinery wasnt 100 yrs old as it  was operating in recent decades, wouldnt be possible to run 100 year old refining equipment. The equipment was yes aging and older.

Modern day refineries do not have to "pollute" the air and or the land. They can and are designed to run on a closed loop system with emissions capturing features, capturing heat and reusing it, CO2 capture and reuse, water recycling among other environmental control features, power gen., recycling and co processing of used cooking oils, used oils etc.

So all the negative connotations with "pollution" by a stationary source ie the refinery can be eliminated and the refinery can and will produce "ultra" clean fuels , yet the anti's will keep on harping about it and keep standing in the of new "greener-cleaner" refineries to be built and waste time and money.

We will be building 2 fairly good sized refineries and 2 smaller regional refineries.

 

 

[ceo_energemsier + 1,818]

(Bloomberg) -- U.S. East Coast ports can expect more cargoes like the one aboard the Maersk Cancun once Philadelphia Energy Solutions refinery shuts.

The tanker delivered 296,000 barrels of reformulated gasoline from the Netherlands to New Jersey last Thursday, on the eve of the fire that sealed the fate of the plant, data compiled by Bloomberg shows.

Suppliers in Canada, Europe and the U.S. Gulf Coast are likely to pick up most of the slack, with sophisticated refineries in India also sending more cargoes through the Suez Canal to New York. Already, traders are paying more to reserve space on Colonial Pipeline, which can move more than 1 million barrels a day of gasoline from Texas and Louisiana to the Eastern Seaboard.

The line had been running below capacity for much of the first half of the year, as ample supplies from abroad supplemented local production.

Now, with gasoline supplies cut by more than 100,000 barrels a day, the line will likely be full, while the Jones Act -- which requires deliveries between U.S. ports be carried on American-built and flagged vessels, staffed by Americans -- limits how much fuel can be shipped on the water from the Gulf Coast. That will leave most of the additional fuel coming from across the Atlantic.

The rise in prices and refining margins should benefit nearby fuel makers such as PBF Energy Inc., which operates two facilities near Philadelphia, and Irving Oil Ltd., whose eastern Canadian facility is already a major supplier to New England. It will also increase demand for tankers able to bring fuel in from Europe and beyond.

More Imports

"This loss of supply will predominantly be made up through imports," said Andy Lipow, oil analyst at Lipow Oil Associates in Houston. "But in that case, the extra demand for cargoes is going to drive up freight rates, and that will be passed on."

India’s Reliance Industries Ltd., which operates the world’s largest refinery complex at Jamnagar, India, and has frequently sold high-octane gasoline to the U.S. coasts and the Caribbean, may ship more cargoes to New York.

"Retail gasoline prices in the Northeast region of the U.S. will become increasingly dependent on import economics from Europe and have potential to experience a sustained increase," said Marc Amons, senior research analyst, North America refining at Wood Mackenzie, in an emailed statement. That leaves the remaining East Coast refiners well-positioned to capitalize on stronger margins, he said.

[ceo_energemsier + 1,818]

6 hours ago, Keith boyd said:

Le sigh.... 

We are producing bitumen at a break even of $20 a barrel. 

Every pipeline in north America that even remotely connects alberta to new markets is ferociously attacked. 

Enbridge line 3 will connect alberta to superior Wisconsin, which has been delayed again. Its currently the farthest along of all the lines.

And keystone XL over a decade later is still mired in beurocratic muck. If a neighboring country did this to say Saudi Arabia or Iran there would be boots on the ground clearing a path for the pipeline and protestors gunned down and used as backfill in the trench.

 

Also as far as upgraded crude.....well the best stuff we got is syncrude light sweet and the Edmonton refinery buys it for $150 a barrel. (Canadian)  The stuff is so close to finished product you could damn near run an old diesel tractor on it the way it is. 

(Bloomberg) -- Alberta’s new government plans to sell the leases and services the Canadian province has accrued to help companies ship oil out of the region. CIBC Capital Markets has been hired to help with the transaction.

Jason Kenney, elected premier last month, campaigned on a platform that included getting rid of predecessor Rachel Notley’s crude-by-rail program, arguing that the business should be left to the private sector. The oil-rich province invested C$3.7 billion ($2.8 billion) in the plan.

“According to industry forecasts and statements by producers, the future of crude-by-rail in Alberta is very bright – and will continue to be so, without government interference,” Energy Minister Sonya Savage said in a statement Thursday.

Notley set up the rail program to help alleviate a glut caused by too much oil and not enough export pipelines, a situation that caused Canadian oil prices to collapse last year and prompted the government to impose mandatory production limits on large crude producers.

Not all companies had the capital to invest in shipping crude by rail, she said at the time. Her government said the program would have netted C$2.2 billion by generating C$5.9 billion from sales and increased royalty and tax revenue.

Canada’s crude-by-rail shipments collapsed in February to the lowest in more than a year after government production limits caused heavy Canadian crude’s discount to benchmark futures to narrow so much that it made shipping by rail uneconomic. Since then, exports by rail have risen by more than 100,000 barrels a day to 236,000 in April, National Energy Board data show.

[Ward Smith + 6,615]

1 hour ago, Jan van Eck said:

I would suggest that the only part of the refinery that is actually 100 years old is the soil underneath it. 

The various components would be continually replaced over time.  Nothing of the original steel would remain at this point. 

And yet they're still grandfathered in. It's a goofy game. 

As for firing Federal employees? Impossible thanks to the Civil Service Act placed on our shoulders by Kennedy. There was an hilarious article in the Wall Street Journal about how few Federal employees are ever fired. Their response? "Our employees are the best of the best so naturally they never need to be fired". And this by their direct management, never mind the absolute impossibility of a politician doing it. Trump has direct authority over 0.003% of the federal workforce, which coincidentally is EXACTLY the percentage named the the WSJ article. 

[Jan van Eck + 7,558]

14 hours ago, Ward Smith said:

As for firing Federal employees? Impossible thanks to the Civil Service Act placed on our shoulders by Kennedy.

I think you are confusing being fired with being paid.  There is nothing to stop the Administration from "firing" an entire Department and sending them all home, then selling off the desks and chairs as govt surplus to make sure they don't comeback.  Now, those employees may not end up cut off the payroll; that is an issue for another day.  My guess is that, eventually, they would be discharged.  But at least they are no longer sitting in desks in Washington causing problems.  Right now, the bureaucratic class is a parasitic attachment to society, sucking the lifeblood out of the business community.  All manner of totally crazy ideas get crafted into "policy," all generated by professional bureaucrats.  And those become a huge burden. 

The expeditious solution is to send them home - permanently.  Pull the badges and they don't step foot in the building again.  They may have to be paid, possibly for years.  But at least they are not answering the phones, creating "meetings," and figuring out more burdens and obstacles for the businessmen.  They are gone.  Forever.  What you do with those offices is lease them out to various corporations at cut rates for long terms, so that the bureaucrats do not come back in the event the Governing Party changes hands.  

Let me give you an example of how pernicious this is.  Huge parts of the Bureaucracy create what are known as the "Consolidated Federal Regulations," or CFR's. The CFR's tell, in minute detail, everything that a manufacturer or operator has to do to be "in compliance."  The idea of everyone being "in compliance" is very dear to the bureaucrat.  They live for that.  So: example.  Every now and then a big hurricane whacks into the coast of Louisiana and wrecks the place, creating the need for rapid evacuations of hundreds of thousands, typically to Houston and other cities farther West.  FEMA then calls for buses to come collect the people and move them.  The bus industry always has older buses sitting in the back lot as "spares," in case they need extra equipment or another unit is down.  But to mobilize those buses, they have to have a plate, and to obtain a plate, it has to be insured and inspected.  The inspection has to be "fresh," and is done by the State DMV.  Those inspections are scheduled at irregular intervals, usually once in two weeks.  The inspector does his thing and if he finds so much as an overhead seat reading lamp burnt out, he will not issue the Inspection.  The bus goes back to the yard for repairs  (replacement of the reading bulb) and then waits for the next available inspection date.  Meanwhile, the refugees at the Superdome in New Orleans sit and wait.

Now a logical solution to this is for the Feds, as FEMA, to simply commandeer these buses and bypass all State authorities by issuing FEMA plates, and that bus now runs under Federal authority.  FEMA accepts the vehicle liability, becomes the insurer for that bus, and FEMA issues an insurance certificate, done by fax or email scan, the Federal Exemption is taped to the inside side window, the Federal Plate is attached to the back, and off that bus goes.  It is exempt from State oversight or weigh scale inspections and everything else, as it is running as the same as an Army Truck. 

Now you can increase your fleet of buses instantly, by the hundreds, as those spare-capacity machines are Federalized.  All the Company does is supply the drivers.  As for fuel, FEMA issues a charge card and the fuel bill goes to FEMA, those buses never stop running. 

Does FEMA do this?  Of course not.  FEMA is another ossified bureaucracy, and to do that would be anathema to a bureaucrat, either Federal or State. So the spare buses just sit, FEMA has no transport, and you have people literally dying inside the Superdome, lying in the filth. 

The solution is for the President to hire a competent manager for FEMA, not Brownie from the Arabian Horse Foundation, and he goes in there, orders the plates, orders the insurance certs, orders the fuel cards, and fires anyone and everyone who gets in the way.  But you need dynamic leaders to do that, men with big brass balls, and those guys are not being hired.  The upshot is that the entire FEMA and the rest of the bureaucracy remains mired in decrepitude and inaction. 

Firing the incompetent, the laggards, the unimaginative, may be expensive.  You may well have to pay them to stay home.  Such is life.  But Trump can do it, if he sets his mind to the task at hand.  Will he?  Probably not.  He seems to have big problems attracting qualified people into the Administration.  If he hired me, I would make it happen. Nobody gets in my way, that's for sure. 

Edited June 28, 2019 by Jan van Eck

[Ward Smith + 6,615]

13 hours ago, Jan van Eck said:

If he hired me, I would make it happen. Nobody gets in my way, that's for sure. 

If I knew the man, I'd be giving him your name right now. The swamp is fighting back, doing what swamp critters do, such as spitting on customers in restaurants (not to mention spitting on their food in the back) if they're in the Trump camp. No wonder these billionaires aren't interested in putting their necks on the block. 

I'm just ornery enough to volunteer myself, but it would only be a matter of time until I accidentally on purpose see if I can punch one of those critters into the next county with one blow. And as papa said, never wrestle with a pig in the mud, you're just going to get filthy and the pig enjoys it. 

[Jan van Eck + 7,558]

22 minutes ago, Ward Smith said:

and the pig enjoys it. 

I'm still laughing!  You made my day!

[Enthalpic + 1,496]

On 6/27/2019 at 5:47 PM, ceo_energemsier said:

Modern day refineries do not have to "pollute" the air and or the land. They can and are designed to run on a closed loop system with emissions capturing features, capturing heat and reusing it, CO2 capture and reuse, water recycling among other environmental control features, power gen., recycling and co processing of used cooking oils, used oils etc.

 

 

 

Have you ever driven by a refinery? They have plenty of smokestacks and flaring towers etc.  Certainly not a closed loop.

 

[ceo_energemsier + 1,818]

29 minutes ago, Enthalpic said:

Have you ever driven by a refinery? They have plenty of smokestacks and flaring towers etc.  Certainly not a closed loop.

 

I am referring to modern ones that are going to be built, essentially zero emissions, just about everything on a closed loop system. Minimal emissions from a stationary source. And yes we are in the process of building 3 of those , build out is in several phases and produce ultra clean fuels, biofuels (non food crop) and integrated with recycling, upgrading and blending of used cooking oils etc.

[Enthalpic + 1,496]

31 minutes ago, ceo_energemsier said:

I am referring to modern ones that are going to be built, essentially zero emissions, just about everything on a closed loop system. Minimal emissions from a stationary source. And yes we are in the process of building 3 of those , build out is in several phases and produce ultra clean fuels, biofuels (non food crop) and integrated with recycling, upgrading and blending of used cooking oils etc.

I worked in environmental regulation too long to believe that.  Here are the annual emissions from a local refinery (not brand new), and this is what they admit. Literally tonnes of emissions of a variety of types - even if modern systems reduced that by an order of magnitude I wouldn't call it "essentially zero emissions."

https://pollution-waste.canada.ca/national-release-inventory/archives/index.cfm?do=facility_substance_summary&lang=en&opt_npri_id=0000003707&opt_report_year=2017

The NPRI is a great tool to see just how much pollution industries in Canada emit (a lot).

All of our refineries are on the east side of the city because the prevailing winds are from the north west.

Edited June 30, 2019 by Enthalpic

[Jan van Eck + 7,558]

29 minutes ago, Enthalpic said:

All of our refineries are on the east side of the city because the prevailing winds are from the north west.

You make it sound as if it is some sort of totally mortal sin for the oil guys to build and run a refinery in Canada, where whatever it creates as pollutants gets blown off into the vast empty spaces of the country, there to dilute to background levels soon enough.  Meanwhile, the society benefits with vast amounts of oil products including lubricants, plastics, heating oils, jet fuels, and ground transport gasoline and diesel, together with miscellaneous other products such as propane and whatever.  Why you would moan and groan about this is quite beyond me. Meanwhile, aren't you the guy who burns natural gas off to run hot water under his driveway to melt off the snow, so that you have a nice clean winter driveway that you don't have to get out of bed to go shovel?    Spare me the laments, Canada!

[Enthalpic + 1,496]

3 minutes ago, Jan van Eck said:

You make it sound as if it is some sort of totally mortal sin for the oil guys to build and run a refinery in Canada, where whatever it creates as pollutants gets blown off into the vast empty spaces of the country, there to dilute to background levels soon enough.  Meanwhile, the society benefits with vast amounts of oil products including lubricants, plastics, heating oils, jet fuels, and ground transport gasoline and diesel, together with miscellaneous other products such as propane and whatever.  Why you would moan and groan about this is quite beyond me. Meanwhile, aren't you the guy who burns natural gas off to run hot water under his driveway to melt off the snow, so that you have a nice clean winter driveway that you don't have to get out of bed to go shovel?    Spare me the laments, Canada!

I didn't actually complain, I just noted the emissions.  The air actually blows over a suburb before reaching the "vast empty spaces." 

I admit I waste a lot of energy - and I don't want to change my behavior - therefore I want more clean energy sources so my actions are less damaging.

[Jan van Eck + 7,558]

21 minutes ago, Enthalpic said:

and I don't want to change my behavior

That is the "admission of the century"!!!!!

OK, so everybody wants a sparkling clean refinery.  tell you what: society can "socialize" the costs of the clean air, by agreeing to shout those refinery owners for extra baghouse and electrostatic filters and even a nice wash station complete with fog nozzles. Just throw some bucks at it, and you will get it down to where you don't notice anything coming out the stack.   Fair enough? 

[Jan van Eck + 7,558]

28 minutes ago, Enthalpic said:

therefore I want more clean energy sources so my actions are less damaging.

Instead of having your neat hot-water driveway snow melter system, here is What I had to face last winter, with a snow shovel.  I must have lost ten pounds shovelling out that 130 feet of driveway.  Amazing.

 

[Enthalpic + 1,496]

5 minutes ago, Jan van Eck said:

 

OK, so everybody wants a sparkling clean refinery.  tell you what: society can "socialize" the costs of the clean air, by agreeing to shout those refinery owners for extra baghouse and electrostatic filters and even a nice wash station complete with fog nozzles. Just throw some bucks at it, and you will get it down to where you don't notice anything coming out the stack.   Fair enough? 

Yes, but the industries will only do that if we force them through regulation a.k.a government.

[Enthalpic + 1,496]

2 minutes ago, Jan van Eck said:

Instead of having your neat hot-water driveway snow melter system, here is What I had to face last winter, with a snow shovel.  I must have lost ten pounds shovelling out that 130 feet of driveway.  Amazing.

 

It's not like I installed the thing, it came with the place.

[Jan van Eck + 7,558]

1 minute ago, Enthalpic said:

It's not like I installed the thing, it came with the place.

And if you were a total zealot purist you would leave it turned OFF! 🤩

[Enthalpic + 1,496]

10 minutes ago, Jan van Eck said:

That is the "admission of the century"!!!!!

OK, so everybody wants a sparkling clean refinery.  tell you what: society can "socialize" the costs of the clean air, by agreeing to shout those refinery owners for extra baghouse and electrostatic filters and even a nice wash station complete with fog nozzles. Just throw some bucks at it, and you will get it down to where you don't notice anything coming out the stack.   Fair enough? 

Also, those devices only convert air emissions into land based or off-site emissions (which admittedly are much better handled / safer for the environment but still exist nonetheless).

[Jan van Eck + 7,558]

1 minute ago, Enthalpic said:

Also, those devices only convert air emissions into land based or off-site emissions (which admittedly are much better handled / safer for the environment but still exist nonetheless).

At that point they are in a form where they can be attacked with Converter machinery to be re-formed into other, useful compounds for sale.

One man's waste is the next man's gold.

[Enthalpic + 1,496]

8 minutes ago, Jan van Eck said:

Instead of having your neat hot-water driveway snow melter system, here is What I had to face last winter, with a snow shovel.  I must have lost ten pounds shovelling out that 130 feet of driveway.  Amazing.

 

Adipose tissue is mostly triglycerides (hydrocarbons) you polluter.

[Enthalpic + 1,496]

3 minutes ago, Jan van Eck said:

 

One man's waste is the next man's gold.

For sure; click the link for the local refineries emissions above. 11 tonnes of ammonia lost to the air - that could fertilize fields.  Literally tonnes of other stuff.

Edited June 30, 2019 by Enthalpic

[Jan van Eck + 7,558]

1 minute ago, Enthalpic said:

For sure; click the link for the local refineries emissions above. 11 tonnes of ammonia lost to the air - that could fertilize fields.  Literally tonnes of other stuff.

On the other hand, all is not lost.  I would speculate that that ammonia would eventually fix to dust particles and come down somewhere on someone's field as fertilizer.  Hard to believe that it is going to hang in the atmosphere forever.  I dunno, just speculating. Leave it to you to give the definitive answer.  Cheers.  And don't forget to vote, the Green Party is running a candidate in your Riding in October!

[Enthalpic + 1,496]

Just now, Jan van Eck said:

On the other hand, all is not lost.  I would speculate that that ammonia would eventually fix to dust particles and come down somewhere on someone's field as fertilizer.  Hard to believe that it is going to hang in the atmosphere forever.  I dunno, just speculating. Leave it to you to give the definitive answer.  Cheers.  And don't forget to vote, the Green Party is running a candidate in your Riding in October!

I saw that coming, yes the nitrogen will end up somewhere but will not be used to maximum efficiency. 

I vote strategically - the most "left" candidate who has a hope in hell of winning. In Alberta all is lost to Cons.

[ceo_energemsier + 1,818]

As of January 1, 2019, U.S. operable atmospheric crude oil distillation capacity was a record-high 18.8 million barrels per calendar day (b/cd), an increase of 1.1% since the beginning of 2018, according to EIA’s annual Refinery Capacity Report. The previous high of 18.6 million b/cd was set at the beginning of 1981. U.S. annual operable crude oil distillation unit (CDU) capacity has increased slightly in six of the past seven years. Operable capacity includes both idle and operating capacity.

Refinery capacity is measured in two ways: barrels per calendar day and barrels per stream day. Barrels per calendar day reflect the input that a distillation unit can process in a 24-hour period under usual operating conditions, taking into account both planned and unplanned maintenance.

Barrels per stream day reflect the maximum number of barrels of input that a distillation facility can process within a 24-hour period when running at full capacity under optimal crude oil and product slate conditions with no allowance for downtime. Stream day capacity is typically about 6% higher than calendar day capacity.

Source: U.S. Energy Information Administration, Refinery Capacity Report

EIA’s Refinery Capacity Report also includes information about secondary refining units—downstream refinery units that process the products coming from the atmospheric crude oil distillation unit into ultra-low sulfur diesel, gasoline, and other petroleum products. Secondary refining capacity, including thermal cracking (coking), catalytic hydrocracking, and hydrotreating and desulfurization, increased by less than 1% from year-ago levels.

The number of operable refineries remained at 135 on January 1, 2019; however, similar to last year’s report, four refineries previously considered separate in survey data were merged into two. Tesoro Refining & Marketing’s Carson and Wilmington plants (now owned by Marathon) in California combined operations, and the Par Hawaii and Island Energy Services plants in Kapolei, Hawaii, also merged.

Targa Resources started up a new condensate splitter in Channelview, Texas, in 2019 that was idle at the start of the year but began operating during the first quarter. Suncor Energy split its reporting of the Commerce City East and West plants in Colorado.

Marathon Petroleum Corporation acquired 10 refineries from Andeavor in 2018, making it the largest refiner in the United States. Marathon’s refineries collectively have an operable capacity of slightly more than 3.0 million b/cd, 16% of total U.S. refining capacity and about 800,000 b/cd more capacity than the second-largest refiner, Valero Energy Corporation.

Refinery runs and crude oil production both continued at record levels in the United States in 2018. U.S. crude oil production, which averaged 11.0 million barrels per day (b/d) in 2018, has more than doubled since 2009. Crude oil inputs to refineries averaged 17.0 million b/d in 2018 compared with 14.3 million b/d in 2009.

Since 2009, operable refinery crude oil distillation capacity increased 1.2 million b/cd, and utilization rose from 83% in 2009 to 93% in 2018, resulting in the 2.6 million b/d increase in crude oil inputs. During the same period, U.S. crude oil imports decreased by 1.3 million b/d, and U.S. crude oil exports increased by 2.0 million b/d, leading to an overall decrease in net imports of 3.3 million b/d.

Source: U.S. Energy Information Administration, Refinery Capacity Report
Note: Differences between crude oil inputs and the sum of production and net imports reflect inventory changes and unaccounted for crude oil.

Note: Differences between crude oil inputs and the sum of production and net imports reflect inventory changes and unaccounted for crude oil.
EIA’s Refinery Capacity Report also includes information on capacity expansions planned for 2019. Based on information reported to EIA in the most recent update, U.S. refining capacity will not expand significantly during 2019. A June 21 fire at the 335,000 b/cd capacity Philadelphia Energy Solutions refinery complex, the largest refinery on the East Coast, has resulted in its announced closure.

Further investment in U.S. refinery expansion projects depends on expectations about crude oil price spreads, the characteristics of the crude oils produced, product specifications, and the relative economic advantage of the U.S. refining fleet compared with refineries in the rest of the world.

[ceo_energemsier + 1,818]

Philadelphia Energy Solutions (PES) announced last week (on June 26) that it was shutting down its 335-Mb/d refinery in Philadelphia, PA. This announcement came just five days after a major fire destroyed a portion of the refinery, which turned out to be the last straw for the facility that has been struggling financially for many years. Today, we consider the various market impacts that will likely follow the closure of the PES refinery, including its effect on fuel supply, where the closure leaves refinery production capacity in the region and how the refined product supply will need to adjust in response.

 

The PES refinery, which has a long history in the Philadelphia region, is currently made up of two adjacent facilities located at Point Breeze and Girard Point (shown in the map to the left in Figure 1). The initial refining facility at Point Breeze was constructed in 1870 by Atlantic Refining Company, while the Girard Point facility was constructed in the 1920s by Gulf Oil. Over the years, the facilities have been modernized and expanded, and ownership has changed hands several times, as shown in the timeline to the right in Figure 1, with the two facilities integrating in 1995 under the Sunoco banner. Sunoco, now a subsidiary of Energy Transfer, reportedly contemplated closure of the refinery in 2012 but subsequently formed a joint venture (JV) with The Carlyle Group called Philadelphia Energy Solutions, or PES. After a bankruptcy restructuring in 2018, Credit Suisse Asset Management and Bardin Hill became majority shareholders in the partnership, leaving The Carlyle Group/Energy Transfer JV with a minority stake.

 

 

On June 21, 2019, an explosion and fire was reported in the hydrofluoric (HF) alkylation unit at Girard Point, which led to an unplanned shutdown of the facility. Fortunately, there were no major injuries.  Alkylate is a premium gasoline blendstock, which is highly valuable to a refinery due to its high octane level, low sulfur content, and low Reid Vapor Pressure(RVP). While fires can occasionally occur at refineries, this incident apparently caused significant damage to the alkylation unit and ultimately forced the entire facility to shut down. Whether the incident caused damage to other process units or infrastructure at the refinery — or whether it was more of a containment problem for alkylation feedstock — is not known at this time.

The fire in the alkylation unit provides evidence of just how important every process unit is in a refinery.  Refineries function as a system, and without key process units and logistics in place, an interruption on one process unit can cause major ramifications to other processes that are dependent on that unit. In the case of the PES alkylation unit, it causes a reaction between volatile pressurized liquids isobutane and butylene (“mixed C4 streams”; note some refineries also use propylene feed) to make the premium gasoline blendstock, alkylate. Isobutane and butylene are both contained within mixed C4 streams produced inside the refinery by process units that crack molecules, such as fluid catalytic crackers (FCCs), cokers, hydrocrackers, etc.; these components are individually worth much less than gasoline. Without an alkylation unit, PES would be forced to either sell these mixed C4 streams at a significant loss or perhaps reduce refinery throughput due to limited storage capacity. In other words, those streams must go somewhere and without the logistics in place, the operation of the refinery is compromised.

Estimates from Baker & O’Brien’s PRISM modeling system show that, under normal operation, the entire gasoline pool at PES was composed of about 15% alkylate. Without alkylate, and assuming no other process units were damaged in the fire, the amount of on-spec gasoline that the facility is able to manufacture would be restricted. Typically, such an incident would result in a shorter-term shutdown to repair and rebuild the unit. However, in the case of PES, which was already

experiencing financial distress, this doesn’t appear to have been an option — even without the fire, a permanent shutdown was likely in its future. Since gasoline generates roughly half of the refinery’s revenue, the loss of alkylate coupled with the cost of rebuilding the facility would, in any event, be a severe financial penalty for the refinery. However, in this case, the event compounded the financial woes already being experienced.

 

PES is the latest in a long line of refinery closures along the Northeast over the last decade. The Petroleum Administration for Defense District (PADD) 1 market can be a challenging place to operate a refinery due to: (1) a lack of pipeline access to domestic crude oil supply (U.S. production can only move there via rail or Jones Act vessel), resulting in a heavy reliance on imported crude oils); (2) higher operating costs; and (3) competition for market share from Gulf Coast refiners via the

Colonial Pipeline. On the flip side, Northeast consumers benefit from a local source of refined products, particularly when constraints hit other supply sources (such as hurricanes in the Gulf of Mexico).

In the past 10 years, more than 800 Mb/d of refining capacity has been removed from the Northeast market, as plotted in Figure 2 below, including the closure of PES (pink layer to the upper-right). (*The Hess Port Reading refinery’s production capacity has been used in place of its crude capacity.) Note that two of the facilities that were closed in this timeframe — Valero’s Delaware City and Phillips 66’s Trainer refineries (blue- and pink-striped layers, respectively) — were subsequently restarted. In addition to these, other key Northeast refined-product suppliers located outside of the region also have shut down in this time period. These include Hovensa St. Croix and Valero Aruba (both in the Caribbean, and both reportedly restarting under new ownership,) and Imperial Dartmouth in Nova Scotia.

 

With PES shutting down, Baker & O’Brien estimates that 150 Mb/d of locally produced gasoline and 117 Mb/d of distillates (diesel and jet fuel), among other products, will no longer be available to the regional market. So how much production capacity remains in PADD 1? Figure 3 shows the remaining refineries (blue icons and rectangles) and the related pipelines in relation to the now-closed PES refinery (gray icon and rectangle):

• PBF Energy operates a 190-Mb/d refinery in Delaware City, DE. The refinery was acquired in March 2010 from Valero, which had previously shut down the refinery in November 2009. After a period of maintenance and modifications, the refinery was restarted by PBF in June 2011.
• PBF also operates a 185-Mb/d refinery in Paulsboro, NJ. The refinery was acquired in late 2010 from Valero and, unlike the Delaware City facility, was still operating at the time of purchase.
• Phillips 66 (P66) operates the 258-Mb/d Bayway refinery in Linden, NJ.
• Monroe Energy, a subsidiary of Delta Air Lines, operates a 185-Mb/d refinery in Trainer, PA. The refinery was acquired in June 2012 from Phillips 66, who had previously shut down the refinery in September 2011; it was restarted in September 2012 by Monroe.

 

This set of Northeast refineries — even when it included PES — produce only a small portion of the gasoline and diesel needed to meet PADD 1 demand. The black bar segments across the bottom of the three charts in Figure 4 shows the gasoline, diesel and jet fuel produced by the Northeast refineries, while the red bar segments shows net deliveries of each refined product from PADD 3 (Gulf Coast), primarily via Colonial Pipeline (red line in Figure 3), the green bar segments show volumes delivered into PADD 1 from PADD 2 (Midwest), and the purple bar segments show waterborne imports. The black line across the top of each chart shows PADD 1 consumption. With Colonial Pipeline seasonally at full capacity, it will be difficult for that system to push more barrels from the Gulf Coast via pipeline into the Northeast market. Therefore, imports will have to increase to balance the demand requirement. The closure of PES could also affect the ongoing effort by Buckeye Partners to make bidirectional the western Pennsylvania portion of the Laurel Pipeline (blue line in the map above), which now flows west, to facilitate movements of gasoline and diesel from the Midwest into the Northeast market.

 

 

Reduced local supply in the Northeast market has already had an immediate price effect, with New York Harbor (NYH) prices strengthening compared to other markets. We expect that Northeast prices will have to remain more robust on average to attract additional supplies and/or refining runs, which will benefit the remaining refiners in the region.

The closure of PES represents the end of an era for the 150-year old facility. But in the context of the Northeast refining market, it’s yet another symptom of the challenging dynamics for refiners in the region. As for the remaining facilities in PADD 1, access to cheaper domestic or Canadian crude oil supply would certainly help refiners potentially survive additional headwinds that may come their way .