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Gulf Coast working to fill a fuel void in Northeast
Fuel Fix ^ | January 9, 2012 | Simone Sebastian

Posted on 01/09/2012 6:08:47 AM PST by thackney

Northeastern states are slated to lose half of their regional capacity for fuel production by midyear as financial woes push refineries there to idle, a trend likely to increase the region’s dependency on Gulf Coast supply.

A Houston-to-New York pipeline is making major expansions to accommodate growing demand to transport gasoline and other fuels up north from the Gulf Coast to fill the potential supply void.

The Gulf already supplies about half of the Northeast’s demand for petroleum products, said Mindi Farber-Deanda, head of the liquid fuels market team for the U.S. Energy Information Administration.

But the shutdown of production at two major Pennsylvania refineries last year and potential closure of a third could put the region in a precarious position and stress supplies of gasoline, jet fuel and heating oil, the agency concluded in a new report.

“It’s marginal, but it matters,” Farber-Deanda said of the drop in the Northeast’s local fuel production. “Before, you could get a certain percentage of supply from local refineries. Now you get it from Europe and the Gulf.”

The report noted that Northeastern states could experience “spot shortages with price hikes” for gasoline and other fuels as refineries discontinue operations.

Sunoco announced last month that it will idle operation of its 335,000 barrel-per-day refinery in Marcus Hook, Pa., part of the company’s plan to pull out of the refining business altogether. If Sunoco doesn’t find a buyer for its 178,000-barrel-per-day Philadelphia refinery by July, it will go off line, too, the company has said.

ConocoPhillips announced a similar move in September, taking its 185,000-barrel-per-day Trainer, Pa., refinery off line to prepare it for sale.

Pressure points

A combination of the sagging economy and improved fuel efficiency in vehicles and equipment has caused demand for some fuels to plateau. Meanwhile, competition from larger and more efficient refineries on the Gulf Coast and imports from Europe put pressure on local fuel producers, said Bill Day, a spokesman for San Antonio-based refiner Valero.

“They found it very difficult to compete,” he said. “If there was demand for product there, those refineries wouldn’t close down.”

Valero pulled out of the Northeast in 2010, when it sold its Delaware City, Del., and Paulsboro, N.J., refineries.

The struggling European economy has left refiners on the continent with plenty of gasoline to ship overseas.

Cleaner heating oil

A bigger concern for the Northeast is heating oil.

Demand for ultra-low-sulfur heating oil is expected to rise next fall, when regulations taking effect in New York will require use of the cleaner fuel in boilers that warm buildings. A limited number of refineries are equipped to produce it.

“Heating oil concerns are probably the greatest,” said Terry Higgins, executive director of refining for consulting company Hart Energy. “A cold snap, with a strong surge on heating oil needs, could be a strain on the system.”

Room to grow

The Gulf Coast is replete with refineries that are expanding or have room to increase production, he said. Motiva Enterprises, a joint venture of Shell and Saudi Aramco, is nearing the end of a massive expansion of its Port Arthur refinery to increase production of ultra-low sulfur fuel and other petroleum products.

In 2010, Gulf Coast area refiners produced a net 3.4 million barrels per day of ultralow-sulfur distillate fuel oil, a category that includes the clean heating oil, according to Energy Information Administration data. That’s up from just 23,000 barrels per day in 2005.

Colonial Pipeline, a major thoroughfare for shipping fuels from Gulf Coast refineries to East Coast markets, has seen growing demand from refiners to ship larger amounts of its products north, spokesman Steve Baker said.

The 5,500-mile pipeline transports heating oil, as well as gasoline, diesel fuel and other petroleum products.

Last year, Colonial added 120,000 barrels per day of carrying capacity to its system. By mid-2012, it will have expanded the flow of distillates – including heating oil, jet fuel and diesel – by another 55,000 barrels per day. In December, the company announced it would expand its gasoline transport capacity by another 100,000 barrels per day.

In total, the expansions will increase the system’s capacity by about 8 percent, Baker said.

“We have seen a rising demand throughout the year” for fuel transport between the Gulf Coast and the Northeast, Baker said. “These are big capital investments. It’s a significant increase.”


TOPICS: News/Current Events; US: Louisiana; US: Texas
KEYWORDS: diesel; energy; gasoline; refinery

1 posted on 01/09/2012 6:08:55 AM PST by thackney
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To: thackney
Colonial Pipeline

http://www.colpipe.com/ab_faq.asp

2 posted on 01/09/2012 6:10:23 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney

So, just before Christmas I saw a story indicating America was awash in gasoline. In the absense of any other info it appears the oil industry’s answer is to reduce refining capacity because of some alleged “financial woes”.

Can anybody out there tell me what the financial woes are?


3 posted on 01/09/2012 6:14:47 AM PST by dools0007world
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To: thackney
A Houston-to-New York pipeline is making major expansions to accommodate growing demand to transport gasoline and other fuels up north

But pipelines are EVIL! /s

All those liberals in New York would freeze in the dark without coal and oil.

4 posted on 01/09/2012 6:18:46 AM PST by FatherofFive (Islam is evil and must be eradicated)
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To: thackney
A combination of the sagging economy and improved fuel efficiency in vehicles and equipment has caused demand for some fuels to plateau.

Isn't the demand greater in the NE corridor than in the gulf states, given the cold winters and dense population?

It does not make sense that the PA refineries are losing money, while the gulf coast can sustain them.

5 posted on 01/09/2012 6:20:18 AM PST by World'sGoneInsane (We Can Take OUR Country Back--Perry 2012)
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To: dools0007world
Our refining capacity has exceeded our domestic demand resulting in us becoming a net exporter of refined petroleum products.

While high oil prices bring lots of dollars to the upstream producers, that high oil price is a cost of feedstock to refineries and has made it a rather tight business as of late.


6 posted on 01/09/2012 6:30:05 AM PST by thackney (life is fragile, handle with prayer)
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To: World'sGoneInsane
It does not make sense that the PA refineries are losing money, while the gulf coast can sustain them.

I would say many business are more economically in the Gulf Coast versus the Northeast. Given more of the available feedstock for those business are located here, it makes even more sense. As an additional plus, it is cheaper to operate a refinery outside of freezing temperatures.

7 posted on 01/09/2012 6:34:30 AM PST by thackney (life is fragile, handle with prayer)
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To: World'sGoneInsane
Sorry, I hit return too quickly.

Isn't the demand greater in the NE corridor than in the gulf states, given the cold winters and dense population?

The demand in the Northeast has fallen significantly.

While the gulf coast hasn't seen that amount of decline.


8 posted on 01/09/2012 6:38:48 AM PST by thackney (life is fragile, handle with prayer)
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To: FatherofFive
All those liberals in New York would freeze in the dark without coal and oil.

they can be buried in coal and oil, and still freeze in the dark if they won't turn it into electricity and gasoline.

9 posted on 01/09/2012 6:43:23 AM PST by HIDEK6
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To: FatherofFive

Yep, isn’t that something, a pipeline from here to the northeast is good, but a pipeline from Canada to here is bad.


10 posted on 01/09/2012 6:53:42 AM PST by Texas resident (Hunkered Down)
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To: thackney

Regarding the heating oil issue;
I was under the impression that all US refineries had upgraded to ULSD by now...


11 posted on 01/09/2012 7:26:11 AM PST by Eric in the Ozarks (Gimme that old time fossil fuel.)
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To: World'sGoneInsane
“Isn't the demand greater in the NE corridor than in the gulf states, given the cold winters and dense population?

It does not make sense that the PA refineries are losing money, while the gulf coast can sustain them.”

Closing down of small or obsolete refineries is a trend that has been consistent since the 1970’s. I don't know the specifics on these exact refineries but generally what causes the breaking point is an economy of scale that favors larger refineries for lowest operation cost and greatest profitability that allows sufficient capital investment for modernization.

12 posted on 01/09/2012 7:53:32 AM PST by Hootowl99
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To: Eric in the Ozarks

Under the ULSD regulations, a minimum of 80 percent of the diesel fuel produced for highway vehicles must be ULSD with a maximum sulfur content of 15 parts per million (ppm), while the remaining 20 percent may be low sulfur diesel fuel (LSD) with a maximum sulfur content of 500 ppm. However, beginning June 1, 2010, all highway diesel fuel must be ULSD. Pumps used to dispense diesel fuel into motor vehicles must be labeled as to the type of diesel fuel being dispensed. The 80 percent ULSD production requirement is intended to ensure that ULSD is available for use in model year 2007 and newer diesel vehicles, which require use of ULSD.

http://epa.gov/oecaerth/civil/caa/ultralow-sulfurdieselfuel.html

Locomotive, marine and non-road diesel fuel standards begin at later dates (except in California).
http://www.clean-diesel.org/nonroad.html


13 posted on 01/09/2012 8:03:34 AM PST by thackney (life is fragile, handle with prayer)
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To: dools0007world

Can anybody out there tell me what the financial woes are?


Profit - And that’s not a dirty word.

If a refiner (or any business) can not obtain a profit from the facility it operates, it must consider the alternative.

Ask the stock holders of these companies what they think.
(Look in your 401K or mutual fund first)


14 posted on 01/09/2012 8:03:40 AM PST by maine yankee (I got my Governor at 'Marden's')
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To: Hootowl99
I don't know the specifics on these exact refineries but generally what causes the breaking point is an economy of scale that favors larger refineries for lowest operation cost and greatest profitability that allows sufficient capital investment for modernization.

I guess the northern refineries have unions and stricter environmental laws to contend with. Yes, things have changed since the 70's. Many jobs have been lost to new technology, as well.

15 posted on 01/09/2012 8:09:37 AM PST by World'sGoneInsane (We Can Take OUR Country Back--Perry 2012)
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To: thackney

Good thing next year’s firewood is virtually free around here. Thanks to Irene and the Halloween snow storm I can cut, split and stack firewood for about $20-30 a cord. a cord of wood displaces about 150 gallons of heating oil for me.


16 posted on 01/09/2012 8:26:55 AM PST by Jack of all Trades (Hold your face to the light, even though for the moment you do not see.)
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To: Jack of all Trades
Growing up in Northeast Ohio, my father offset his fuel oil bill with a second in-line furnace, wood fired.

At least he did, when his boys were old enough carry and split. Surprisingly, when I went away to college, they rarely used that wood furnace. I had become the chief splitter using a maul or wedges and sledgehammer.

17 posted on 01/09/2012 8:59:33 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney

I wonder why refineries don’t just produce one product.
Less likely to have a mistake or contamination, fewer storage issues, costs are the same...


18 posted on 01/09/2012 9:13:46 AM PST by Eric in the Ozarks (Gimme that old time fossil fuel.)
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To: Eric in the Ozarks
I wonder why refineries don’t just produce one product.

I suspect most do. But some of those, particularly smaller refineries, may be producing one product that does not yet meet ULSD and have a much more limited market. Eventually they will have to change.

costs are the same...

Everything correct until that. Cost are not the same. Essentially every refinery has to add new or enlarged hydrotreat desulfurization units, or buy much higher priced very sweet crude oil. Even after built running fluid through those units is $/barrel.

Also, some of the larger refineries are essentially 2 or 3 refineries inside one fence. Some have complete trains for all the processes with even separate storage yards. They share some utilities and have the ability to move product from one to another, but normally don't.

19 posted on 01/09/2012 9:30:14 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney

Those must be the older plants.

When the switch was made at Pine Bend, it took about 15 seconds to decide to make 100 percent low sulfur.


20 posted on 01/09/2012 9:47:22 AM PST by Eric in the Ozarks (Gimme that old time fossil fuel.)
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To: Eric in the Ozarks
When the switch was made at Pine Bend, it took about 15 seconds to decide to make 100 percent low sulfur.

That sounds bizarre. They had desulfurization capacity they were not using?

I suspect there was a couple years work prior to the switch from planing, buy and installing equipment.

21 posted on 01/09/2012 9:53:33 AM PST by thackney (life is fragile, handle with prayer)
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To: Eric in the Ozarks

In 2006, the refinery completed a $350 million project to produce ultra low-sulfur diesel fuels and convert diesel fuel to gasoline to meet growing market demand.

http://www.fhr.com/refining/minnesota.aspx


22 posted on 01/09/2012 9:54:48 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney
No.
Once the decision to go low sulfur, the design was made for the refinery's max production. I recall the only Midwest refinery to make both products for any length of time was Mandan.
23 posted on 01/09/2012 9:58:12 AM PST by Eric in the Ozarks (Gimme that old time fossil fuel.)
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To: Eric in the Ozarks

I found a little more detail.

One of the largest projects in refi nery history was completed in May when Pine Bend’s new hydrocracker unit was brought online. This $350 million project includes the new hydrocracker, new hydrogen plant, storage tanks and expanded cooling water capacity. The project was built so that the refi nery can begin producing ultra low sulfur diesel fuel.

http://www.fhr.com/upload/PBCommmattersnl10-06.pdf
Page 2

Construction on the hydrocracker project began in May of 2004.
Here are some interesting facts from the two-year project:
• 1,600 tons of structural steel
• 22 miles of large piping
• 5,109 valves
• 4,548 gaskets
• 29,260 bolts
• 26,355 components
• 353,850 pounds of cracking catalyst
• 1.4 million work hours on fi eld construction
• Peak workforce of 780 contractors
• Two large reactors, each weighing
approximately 1.5 million pounds


24 posted on 01/09/2012 10:00:01 AM PST by thackney (life is fragile, handle with prayer)
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To: maine yankee

Profit, as a component in a supply and demand economy, is not an issue with me. I do have a problem being raped by any collusive industry whose members produce annual reports—supposedly public documents) that are deliberately misleading.

For instance, I Googled a simple question: What is Exxon-Mobile Petroleum Refining income? I could not find an answer anywhere no matter how many ways I asked the question. Don’t pretend to be anything but a novice at reading annual reports or dealing with financial info. If that number was in the company’s annual report I could not find it.

I was able to find a summary of branded refinery cost for Dec 2011 to Jan 2012. 23 and 31 cents on the dollar, respectively. I presume costs encompass all categories of doing business—including gov’t. environmental and safety requirements. In the absense of any other info and by extension, it appears to me like the industry increased its petroleum refinery profitability over the course of that year. Realizing a net profit of better 60 cents/$ seems like a damn good business to me. To the industry’s credit it did this with existing capacity.

My problem with the oil industry and the government is they lie through their teeth. I remember interviewing a Houston-based oil company back in the 70s—about the time of the Carter debacle. One of the people in the room tried to make the argument gas should cost 5$/gal because a gal. of gas could move a 5,000 lb. car 15 miles or some such. Had nothing to do with the quaint concept of “reasonable profit”, supply/demand or any other rational barometer.

It became clear to me at the time (I interviewed most of the major oil companies) that these companies were no more American than Bic pen or Mercedes Benz. And they lie and/or mislead.

As for collusion, the evidence is at the pump. There is simply no credible way three or four different companies, headquartered, producing and shipping from around the country (let alone the globe) can consistently post the exact same price on any given day.

You seem to be a smart fella. Is there a place I can go that breaks down the refinery dollar by relevant costs and profit? I spent an hour looking and was not successful finding it.

I’m not trying to be a wiseguy. I would love to be repudiated. But it’s obvious I’ve arrived at a point where I should be better educated than I am about how the oil industry works and accounts for itself. Empirical evidence only goes so far.

Thank you in advance for a constructive reply.


25 posted on 01/09/2012 10:21:36 AM PST by dools0007world
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To: dools0007world
What is Exxon-Mobile Petroleum Refining income?

ExxonMobil’s Refining Income is listed as the downstream portion of their annual report. Upstream is the crude production, downstream is the refining, chemical is listed separately.

Bottom of Page 27.
http://thomson.mobular.net/thomson/7/3095/4222/document_0/XOM_SAR09.pdf

26 posted on 01/09/2012 11:38:56 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney

Thanks. I appreciate it. I saw it in the report but obviously didn’t know what it meant. But it makes my point about about annual reports. You must know the secret handshakes and euphemisms employed to make any sense of them. Oh, but that’s why we have the “expert” class, isn’t it?


27 posted on 01/09/2012 5:01:41 PM PST by dools0007world
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To: Texas resident
Yep, isn’t that something, a pipeline from here to the northeast is good, but a pipeline from Canada to here is bad.

Facts and logic tend to confuse liberals. They prefer feelings and opinions.

28 posted on 01/10/2012 2:12:30 PM PST by FatherofFive (Islam is evil and must be eradicated)
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