Northeast US oil refineries mull rates cuts, shutdowns ahead of Sandy

Sun Oct 28, 2012 9:32pm IST

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* Northeastern refiners watch, consider unit shutdowns

* Pipelines begin to put storm plans into effect

* Coast Guard issues storm conditions for Mid-Atlantic

By Janet McGurty

NEW YORK, Oct 28 (Reuters) - Oil refineries along the U.S. Atlantic Seaboard, having put their storm preparedness plans in place, were waiting on Sunday to see if they would have to shut units or cut rates at their plants ahead of Hurricane Sandy's expected landfall in the Northeast early this week.

Six East Coast oil refineries representing 1.19 million barrels per day - or 7 percent of total U.S. capacity - could potentially be hit by the deadly storm, which left at least 41 dead as it roared through the Caribbean and churned northward.

The storm threat boosted gasoline and heating oil futures as well as cash product prices in the New York Harbor over the past two sessions.

Hurricane Sandy could be the biggest storm to hit the United States mainland when it is expected to come ashore on Monday night, bringing strong winds and dangerous flooding to the East Coast from the mid-Atlantic states to New England, forecasters said on Sunday.

Sandy could have a brutal impact on major cities in the target zone - including Boston, New York, Washington, Baltimore, and Philadelphia - one of the most densely populated regions of the country.

Some forecasters say Sandy has the potential to be a multibillion-dollar disaster, causing greater damage than last summer's Hurricane Irene, but it was too soon to tell its actual trajectory and refiners were taking early steps to prepare.

"We are taking this seriously, monitoring the storm's progress and weather forecasts, with comprehensive preparedness plans in place," said Michael Karlovich, a spokesman for PBF Energy.

PBF Energy owns and operates two East Coast refineries, the 190,000 barrels-per-day Delaware City plant and the 180,000 bpd Paulsboro plant in southern New Jersey, across the Delaware River from the Philadelphia area.

Sources familiar with Delaware City refinery operations said that discussions continue as to whether to shut down units or cut rates way back ahead of the storm.

Phillips 66, owner of the 238,000 bpd Bayway refinery in Linden, New Jersey, said it is monitoring the storm.

"All of our East Coast operations continue to operate normally while we prepare our facilities for the storm," said Rich Johnson, a spokesman for the company.

A source familiar with Bayway operations said as of Saturday night, there were no units shut yet.

IRENE VS SANDY

Hurricane Irene, which hit the region in August 2011, caused severe flooding and power outages all along the East Coast, and some refinery disruptions. Phillips 66 closed its Bayway refinery while other refiners cut back rates, but the oil industry escaped Irene with little, if any, damage.

Hess Corp said on Friday it had implemented its storm plan for its 70,000 bpd refinery in Port Reading, New Jersey, and that it would continue to watch Sandy's progress.

In addition, two other plants are potentially within the storm's path: Philadelphia Energy Solutions' 330,000 bpd Philadelphia refinery and Delta's Monroe Energy 185,000 bpd plant in Trainer, Pennsylvania.

The Trainer refinery continues to operate normally and expects to continue to, as it expects to escape the brunt of the storm.

"At this time, we have not and do not anticipate changing operation at this juncture," said a source familiar with refinery operations. "We are on the leeward side of the storm's path."

At the Philadelphia refinery, now jointly owned and operated by Sunoco and Carlyle Group, close monitoring of the storm continues.

"Philadelphia Energy Solutions Refining Complex continues monitoring the storm closely," spokeswoman Cherice Corley said, adding they are following their hurricane preparedness plan.

A source familiar with refinery operations said the refinery, the largest in the region, has not cut rates.

Oil markets are watching for any potential disruptions to gasoline and heating oil supplies, as lean fuel stockpiles in the region make the East Coast vulnerable to price spikes, especially ahead of the winter heating season.

The Colonial Pipeline, which carries about 15 percent of the country's gasoline and diesel from Gulf Coast refineries up the New York Harbor, is preparing for the storm, according to spokesman Steve Baker.

The pipeline activated its hurricane preparedness plan at 3 p.m. EDT (1900 GMT) Friday and has already started making sure emergency generators are in place, as well as sa ndbagging cri tical areas which may be prone to flooding.

Buckeye Pipeline, which owns and operates about 6,000 miles of oil product pipelines mostly north and west of Philadelphia, has prepared a Hurricane Contingency Plan.

"Buckeye will continue to operate their pipelines as scheduled until the time that it is no longer safe to do so, or power or product availability make it no longer possible to run a particular line section," the company said in a statement.

"Buckeye has secured some generator capability that is being staged strategically to provide temporary power to certain pump stations," it said.

Vessels in and out of some southern and mid-Atlantic ports are operating under Coast Guard storm conditions.

In Hampton Roads, near the Plains All American's 6.6 million barrels crude and oil products storage facility in Yorktown, Virginia, coastal waters are closed and under code Zulu, the highest warning level. The warning extends from Virginia to the Maryland/Delaware border, with expectations of gale force winds within 12 hours.

The New York harbor is currently under Code Yankee, which expects gale force winds within 24 hours.

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