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Grim Outlook for 4 Gulf Coast Refineries

MSN Money: Grim Outlook for 4 Gulf Coast Refineries

“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.

Monday 5 Sept 2005

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.

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