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Giant Port Arthur refinery unit seen shut for months
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Giant Port Arthur refinery unit seen shut for months

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Giant Port Arthur refinery unit seen shut for months

HOUSTON (Reuters) - Output at the biggest U.S. refinery could be cut by more than half for up to five months after Motiva Enterprise's (MOTIV.UL) failed to restart a major new crude unit at the Port Arthur, Texas, plant over the weekend, sources familiar with operations said on Monday.

Just two weeks after partners Saudi Arabia and Royal Dutch Shell (RDSA.L) cut the ribbon on the new 325,000 barrel per day crude distillation unit that pushed the plant's capacity to 600,000 bpd, jointly owned Motiva shut the unit to fix what was thought to be a leaking valve impairing production.

After the CDU twice failed to restart over the weekend, the refinery found major issues that will take at least two months and potentially up to five months to repair, the two sources who have knowledge of the refinery's operations said.

Motiva said that an unspecified unit had been shut down due to a mechanical issue as the plant was moving toward full operations, adding an investigation was under way to understand the cause of the problem.

"This unplanned unit shutdown is unfortunate, but we will resume normal operations as soon as it is appropriate to do so," the company said in a statement released late Monday.

The news pushed up cash fuel prices and lent support to gasoline futures, traders said. It weighed on oil prices in expectations that other buyers in the United States -- which saw a spike in imports from Saudi Arabia this year -- would have to absorb additional supplies the kingdom had already booked into the market.

"The Saudi loadings to the U.S. had risen massively a few months ago, as they wanted to show they could put barrels in the market when requested -- and they were very vocal about it -- as well as starting to supply Motiva," said Katherine Spector, commodity strategist at the Canadian Imperial Bank of Commerce (CIBC) in New York.

"The question now will be how much storage space at Motiva was already filled, and will they need to divert barrels to other customers."

The entire refinery has not been shut by the outage because the pre-expansion 285,000 bpd crude distillation unit, continues to operate. CDU units perform the initial refining of crude oil coming into the refinery and provide feedstock for all other production units.

While it is not unusual for new refinery units to experience operational teething pains when they are first commissioned, a shutdown lasting months would be a major embarrassment for Motiva and its owners after a landmark $10 billion upgrade.


The outage may also complicate Saudi Arabia's drive to push more crude into the market, as the Port Arthur plant was one of the biggest new outlets for increased production.

U.S. imports from the kingdom jumped to 1.45 million barrels during the first five months of 2012, according to Reuters calculations based on monthly and weekly data from the U.S. Energy Information Administration, the highest level for that period since 2008.

Saudi Arabia pushed oil production to the highest level in decades in May, hitting 10.10 million barrels per day on average for the month according to a Reuters survey, helping to cushion the impact of Western sanctions against Iran's nuclear program, which have threatened Tehran's exports.

Speaking ahead of an OPEC meeting this week, Saudi Oil Minister Ali al-Naimi on Monday said the producer group should increase its oil output target, despite a recent slide in crude prices and comments by other members that high production had created a surplus in the market.

Gasoline prices in the Gulf Coast spot markets jumped more than 5 cents on the news, while RBOB gasoline traded slightly higher even. Oil prices dropped nearly $2 per barrel.

The CDU is the centerpiece of a $10 billion, five-year expansion project that more than doubled the refinery's capacity, and the shutdown comes after the unit's official startup at a May 31 ceremony attended by the chief executives of Royal Dutch Shell Plc and Saudi Aramco. (SDABO.UL)

At the ceremony, Motiva Vice President Tom Purves, who oversaw the expansion project, said the refinery was near its 600,000 bpd capacity and would reach full production by the end of the second quarter, advancing the date the refinery would reach that milestone by a full three months.

Giant Port Arthur refinery unit seen shut for months - Yahoo! Finance

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  #2 (permalink)
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Yeah, prices are falling to fast...we need to come up with an excuse to fck everybody......

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