Gulf Coast Refineries

Hurricane Watch -- September 12, 2020

There is so much fake news out there, I can no longer make sense of even some of the most basic "stuff," like hurricanes. From my perspective this has been a most uneventful hurricane season to date, even including "lo-impact, no-impact Laura." But then we get, see second paragraph in note below:

 Link here.

The Atlantic’s 18th storm is coming together off Florida’s eastern coast and will drift west into the oil-rich Gulf of Mexico over the weekend where it could reach nearly hurricane strength before coming ashore.

When the storm’s winds reach 39 miles (63 kilometers) per hour it will likely be named Sally. That would mark the earliest that 18 storms have formed in the Atlantic during a hurricane season, breaking the previous record set by Stan in October 2005, said Phil Klotzbach, lead author of the Colorado State University seasonal hurricane forecast. It is possible a second system in the far eastern Atlantic will be named first.

“The system is forecast to strengthen to near hurricane intensity by early next week as it moves across the northeastern Gulf of Mexico,” Eric Blake, a hurricane forecaster, wrote in his outlook.

In addition to the depression, which has sparked a tropical storm watch in southern Florida, the hurricane center is watching three other potential storms -- one in the Gulf of Mexico and two off the coast of Africa. On top of that, Tropical Storms Paulette and Rene are churning through the central Atlantic. Paulette will likely become a hurricane and could strike Bermuda Monday.

Bakken, CBR, East Coast Refineries Back In The News -- September 26, 2018

Link here. This is so cool. Haven't heard about this story in a long, long time.

A rail terminal outside of Philadelphia has begun taking deliveries of Bakken crude after going dormant for nearly three years, according to shipping data and a source familiar with operations, as refiners snatch up discounted North American crude barrels.

The 90,000 barrel-per-day-rail terminal in Eddystone, Pennsylvania, has been getting routine deliveries of Bakken crude for the past month, the first significant deliveries since the site went dark in January 2016. Monroe Energy, a subsidiary of Delta Air Lines Inc, is using the terminal to help supply its 185,000 bpd refinery in Trainer, Pennsylvania.

The return of crude deliveries at Eddystone highlights the growing pains confronting U.S. producers who are facing bottlenecks as booming production outpaces pipeline growth. It also shows how U.S. refiners are trying to seize on the bottlenecks, doing whatever they can to access the distressed crude.

I actually find it interesting that there is so much talk about all the pipeline constraints when, in fact, it seems more oil than ever is being produced and shipped by pipeline.

On another note, I alluded to the story a few weeks (?) ago on the blog when it was reported that the  Iowa Supreme Court could shut down the DAPL. If the DAPL is shut down, CBR will come back nicely and CBR is so much ore flexible than a pipeline. At $80 and higher, the differential in shipping costs between CBR and pipeline become less problematic. With less takeaway capacity, North Dakota might not be able to maximize crude oil production, but it will do just fine.

And when Californians complain about $5 gasoline .... well, whatever.

Cheaper For East Coast Refiners To Get Oil From Urals Than North Dakota -- Reuters -- July 24, 2018 -- What's Wrong With This Picture?

Just twelve days ago I pondered aloud where the "Delta refinery" was getting its crude oil. Now we know. And it's a bizarre story to say the least.And so many story lines.

From Reuters:

U.S. refiners will import a record monthly volume of crude from the Caspian region in July after snapping up the cargoes when prices reached near six-year lows, according to market sources and Thomson Reuters shipping data.

The unusually large volume of crude is one of many changes in the international oil trade caused by a flood of U.S. shale oil headed overseas. [Three million bopd.]

Record exports of crude from the United States to Europe and Asia have pushed down the price of comparable oil, such as the crude produced near the Caspian in Kazakhstan and Russia.

That oil is pumped through the CPC pipeline and loaded in the Mediterranean.

U.S. East Coast refiners, which rely on crude imports, have bought most of the 3.7 million barrels of CPC crude that will reach the United States in July.

The East Coast refiners have limited access to the oil produced in the shale fields hundreds of miles away in Texas or North Dakota. They buy additional crude from West Africa, Middle East and Europe.

That is because U.S. domestic shipping rules can make it more expensive for East Coast refiners to ship crude from the Gulf coast to the northeast than it is to import oil.

East Coast refiners "can get oil cheaper from the Urals than the Eagle Ford," said Kyle Cooper, a consultant for options broker Ion Energy.

Anyone who thinks they understand the oil industry better think again.

Update On The "Delta Refinery" In Trainer, PA -- July 12, 2018

I no longer follow the "Delta refinery" and I have definitely "lost the bubble" regarding that refinery and Bakken CBR, but at one time it was quite a story. The original post and updates are at this link.

Update: according to ArgusMedia, profits at the "Delta refinery" helped "stem" rising jet fuel costs. The byline is "Houston." From the article:

• the highest refinery profits since 2015 helped to cut Delta Air Lines' second quarter fuel costs by 4¢/USG, the airline said today
• the 185,000 b/d refinery in Trainer, Pennsylvania, reported a $45mn profit on sharply-higher third-party fuel sales compared to the same quarter last year. Third-party refinery sales — the sale of non-jet fuel produced at Trainer — generated $216mn, compared to $67mn in the same quarter of 2017.
• Delta plans to take the refinery down in the fourth quarter for extensive maintenance

I don't know the source of oil for this refinery -- whether it's still Bakken CBR or not.

PSX To Build New CBR Terminal In The Bakken; Location Not In This Story -- September 4, 2014

Updates

November 21, 2014: update on the Sacajawea Pipeline and Palermo Rail Terminal. To be on-line in first quarter 2016. 

September 5, 2014: see first comment. Looks like this may be at Palermo, ND, about 10 miles east of Stanley, ND, one of the hottest areas in North Dakota. Palermo was mentioned in this posting last year.
 

Original Post

I track CBR terminals here. To the best of my knowledge this PSX announcement is separate from the just-announced Plaza CBR terminal.

Argus Media is reporting:

Phillips 66 will build a rail-loading facility permitted to handle up to 200,000 b/d of Bakken crude, the first time a US refiner has directly owned a North Dakota origination terminal. The company will also buy 500 rail cars, bringing its total fleet to 3,700.

"We have permits in hand in engineering to construct a new rail-loading facility. This is permitted up to 200,000 b/d. We'll probably do about 160,000 b/d" and build about 300,000 bl in storage.

Refiners like Tesoro, Phillips 66 and PBF Energy have been keen to source crude by rail but so far largely invested in refinery-side or destination unloading facilities while taking out capacity, without owning or building the facilities, on the origination side. Producers like EOG Resources and Hess have invested in terminals on the origination or oilfield side.

Phillips 66 is working to bring more advantaged crudes to its refineries and invest more in shale crude logistics, including dropping midstream assets into a master limited partnership (MLP). It is adding another Jones Act vessel for a total of three in its fleet in January, and looking to bring more advantaged crudes to its 250,000 b/d Alliance refinery in Belle Chasse, Louisiana.

The company last year took order of 2,000 new railcars and put in an additional order of 1,200 general purpose rail tanker cars for receipt from summer of 2014 through early 2015 for a total rail-owned fleet capacity of 160,000 b/d.

Phillips 66 unloaded its first unit train on 5 August at its new 70,000 b/d crude-by-rail facility at its 250,000 b/d Bayway refinery in New Jersey. It also has capacity to take 50,000-75,000 b/d from a Global Partners facility, and can also receive crude from the Texas Gulf coast via its two Jones Act vessels.

Garland also sees "a lot of opportunity" around condensate-related infrastructure, including gathering, splitting and dock facilities. "More to come on that in the future," he said.

A 30,000 b/d rail unloading facility at the company's 96,000 b/d refinery in Ferndale, Washington, will be online in the fourth quarter.

With all the environmental activism in the Pacific Northwest I was surprised to see that last line, Ferndale, Washington. I think I posted the story some time ago, but have long forgotten.

And then the very next line in the story:

"We're disappointed" in the slow permitting process for the company's planned 40,000 b/d Santa Maria rail unloading facility, which would serve the company's San Francisco refining complex, but "it just takes time in California to get things permitted," Garland said. The company has also contracted for 20,000 b/d of capacity out of Plains All American Pipeline's upcoming rail terminal in Bakersfield, California.

It is counter-intuitive but that's good news for the Bakken that the company is having problems in California. The dollars that can't be spent in California will be spent elsewhere until California gets the permitting process completed.  

Update On The Delta Airlines Refinery, Trainer, Pennsylvania, Outside Philadelphia

CNBC is reporting:

Sky-high fuel costs have made cost-cutting, not growing market share, the mantra for many airlines. One of Delta's riskier cost-cutting moves, buying an oil refinery, looks like it's starting to pay off.

Delta bought the refinery, which is in Trainer, Pa., just outside of Philadelphia, in 2012 for $150 million as a way to hedge against its biggest expense, jet fuel costs.

But after losing a combined $136 million in the previous nine months, the Trainer refinery turned a profit for the first time in the third quarter, bringing in $3 million.
As a result, the price Delta paid for a gallon of jet fuel dropped 5.4 percent to $2.97 during the quarter. Though its overall fuel costs increased 3 percent, which Delta attributed to an increase in flying capacity.

Delta has said the oil refinery purchase could save the airline as much as $300 million a year in fuel costs, which accounted for 32 percent of operating expenses in the third quarter.

Cool: Delta Bets on Bakken To Boost Refinery Results

Updates

December 6, 2013: Delta Airlines refinery returns a profit. 
 

Original Post

Link here to Reuters.com.

Delta Air Lines Inc plans to run cheaper domestic crude at its newly-acquired Trainer, Pennsylvania refinery to improve profits at the plant, becoming the latest U.S. company to cash in on the burgeoning shale oil boom.

After losing $63 million at the refinery in the fourth quarter, the Atlanta-based airline will receive its first crude shipments there from North Dakota's Bakken shale in the first quarter, the company said during its earnings call Tuesday.

Delta's subsidiary, Monroe Energy LLC, was forced to slow production at the 185,000 barrels-per-day plant in November and December after Hurricane Sandy damaged regional pipelines and terminals, leading to the losses, Paul Jacobson, the company's senior vice president and chief financial officer said during the call.

However, the Trainer refinery will bounce back to a modest profit in the first quarter, Jacobson added.

Delta, Bakken, and a Refinery

Here's that story about Delta Airlines bringing Bakken oil to its "new" refinery. I had read that Delta was "thinking" about this, but I had not seen the story.

A reader sent me the story. Thank you.

Link here the mobile edition of the Philadelphia Inquirer. This is another incredible story on so many levels. Remember: the Trainer refinery had been slated for closure. A lot of things came together, including Bakken oil to save this refinery, and to save a few jobs.

Who knew that the economic solution for the region's beleaguered oil refineries would arrive on a slow train from North Dakota?  

Delta Air Lines, the new owner of the Trainer refinery that is scheduled to reopen later this month, on Thursday became the third fuel producer in the Philadelphia area to announce plans to bring in crude oil by rail from the Bakken oil field in the upper Midwest. Edward Bastian, the airline's president, told an investor conference in New York that Delta plans to replace some imported oil at Trainer with domestic crude brought in by rail.  

The cheaper North Dakota crude could enhance the airline's plans to produce its own jet fuel, Bastian said. "It's very early to draw any conclusions, but this could lead to even larger savings," the airline executive told the Deutsche Bank Aviation and Transportation Conference.  

Delta is counting on its subsidiary, Monroe Energy L.L.C., to generate at least $300 million a year in savings by refining 80 percent of the airline's domestic fuel needs. Delta joins a fast-growing queue of refiners who are building unloading facilities and securing rail cars to tie into the North Dakota shale-oil boom, where producers are employing the same hydraulic fracturing method used to extract natural gas from Pennsylvania's Marcellus Shale.

Go to the link for so much more.

The Bakken, the Shuttered East Coast Refineries, Preferred Sands -- Best Story of the Month?

 Deus ex machina
Preferred Sands, LLC, shows up

Updates

July 12, 2018: highest profit at the "Delta Refinery" since 2015 helps Delta "stem" rising jet fuel costs.

December 6, 2013: Delta Airlines Trainer refinery turns a profit. 

January 22, 2013: from the Yahoo!Finance Oasis message board:

Just drove past rows of tanker cars lined up in Albany. Hard to believe they ship by rail to Albany, load on barges, and ship down the Hudson and around to refineries in Philadelphia. I wonder what this costs. Hudson River is still open.

December 23, 2012: Update on the Sunoco/Carlyle Philadelphia refinery.

July 2, 2012, Philadelphia's Sunoco refinery: CNBC video update on Sunoco/Carlyle buying east coast refinery and supplying it with Bakken oil.  Here's the Yahoo "print" version of the story. And the Oil and Gas Journal story.

April 11, 2012: on the Kudlow Report, CNBC, this date, there was a report that Delta was coming under fire for its proposal to buy an East Coast refinery. It turns out there may be another option being seriously considered: JP Morgan would buy the refinery, and sell jet fuel to Delta at wholesale cost.  The story, it turns out, was reported earlier on CNBC.

April 10, 2012: in today's edition of the WSJ, p. C10, Liam Denning, makes a case for Delta buying COP's Phillips 66 spin-off rather than an East Coast refinery. Phillips 66:

• half of its refining capacity in US where Bakken is being sold at discount
• Gulf Coast refineries can export to Latin America
• margins on the Gulf Coast 2 - 3 times those of East Coast refineries
• will benefit from cheap natural gas
• crude oil bottlenecks require new pipelines; Phillips 66 midstream -- 11% of earnings last year
• 20% of earnings from chemicals; raw materials (like "wet gases") are being sold at discount; for example 60% of its capacity uses ethane (a natural gas by-product) which has fallen in price by almost half in the last six months

Maybe the best of both worlds: Delta needs to buy a refinery in Louisiana.

April 6, 2012: Suddenly "everyone" is interested in refineries! Now the WSJ reports that Delta Air is seriously considering buying COP's idled Trainer refinery near Philadelphia.

Delta Air Lines Inc (DAL), burdened by the soaring cost of jet fuel, is seriously thinking of making some of its own by buying an idled ConocoPhillips (COP) refinery near Philadelphia, people familiar with the matter said Thursday.

Delta, the world's second-biggest airline by traffic, is in talks with Conoco to acquire its Trainer, Pa., facility at a cost of $100 million to $150 million, one person familiar with the matter said. Delta would hire an outside firm to run the refinery.

The move could help supply Delta's operations at La Guardia airport and John F. Kennedy International Airport in New York, and save it most of the so-called crack spread, or the difference charged by a refinery between the cost of a barrel of crude and a barrel of jet fuel. In March, the spread between jet fuel and Brent crude, which is the benchmark that determines the price of most crudes delivered to the East Coast, was $12.85 a barrel, according to energy consultancy IHS Purvin & Gertz. The Trainer refinery, idled since October, has a processing capacity of 185,000 barrels a day, including 23,000 barrels a day of aviation fuel, according to the U.S. Energy Information Administration.

Original Post

This is what keeps me going: surprises coming out of the Bakken.

This story is incredible -- maybe the best story of the month. There will be two links.

"Anon 1" sent me the links.

This is a great story on so many levels. I just love free market capitalism, and this is a phenomenal example.

First link: Bakken oil may just "save" the two or three shuttered refineries on the East Coast.

While it appears too late to spare Marcus Hook, which has been shuttered since December, evidence of new buying interest has emerged this week for two other major plants, potentially saving the Northeast region from a summer fuel squeeze that had unnerved politicians all the way to the White House.

One of those bidders is counting on the boom in light, sweet shale oil to help resuscitate the ailing sector, which has been squeezed between costly, imported light crude, falling gasoline demand and new, more sophisticated overseas rivals.

Preferred Sands LLC, which has grown in five years to become the third-largest supplier of sand and proppants to the hydraulic fracturing industry, touts its deep connections in the shale patches of Bakken, North Dakota, and Eagle Ford, Texas, plus more than 1,500 rail cars with connections to major railroads.

Now, go to the web page of a company providing sand for fracking. 

Once you get a feeling for that company, return to the first link.

As production in landlocked North Dakota and Canada surged, crude prices plunged in the Midwest, giving refiners there a profit advantage that allowed them to chip away at the East Coast market. Some of that oil made it as far south as Louisiana and Texas by rail, but little of it moved east.

But late last year, Sunoco and Conoco tested light, sweet Bakken crude from North Dakota at their plants, with an estimated 10,000 and 20,000 bpd of Bakken oil railed to Albany, New York and then barged down to Philadelphia, traders said.

However, Lynn Elsenhans, then Sunoco's chief executive, said in November that Sunoco Logistics lacked the assets to bring enough crude east to make it economical.

Enter Preferred, which says its train connections give it a leg up over other bidders. It already hauls tons of sand or silica from plants in Nebraska and Arizona to the shale patches in other states, where the "proppant" is injected into wells to allow oil and gas to flow out.

Something tells me we will be seeing a two-page story in the Wall Street Journal some day tying this all together.

Wow, there are so many things I could say about this story, but I think I will let others think about it for awhile, let it simmer, but this is a huge story.

Interesting isn't it? Cushing is overflowing and now, like deus ex machina, Preferred Sands, LLC, shows up with an answer. And a means. Incredible.