Skip to comments.Flint Hills to shut down processing unit at North Pole refinery
Posted on 04/11/2012 5:00:38 AM PDT by thackney
Flint Hills Resources announced plans Tuesday to idle one of its two operating refinery units in North Pole, a move that will result in layoffs for roughly a quarter of its local employees.
In a news release, the company blamed the move on challenging economics and rising crude prices.
The process of idling the No. 1 crude unit will lead to a gradual reduction of 35 to 40 workers at the refinery during the next five months.
Flint Hills has struggled with high costs at its North Pole location for years, saying the refinerys dependence on crude oil as a power source puts the plant at a disadvantage against competitors who have access to cheaper natural gas. The refinery previously idled its No. 3 crude unit in 2010 as a cost-cutting measure.
In a statement, refinery manager Mike Brose called the latest move the most difficult decision we have had to make in operating this refinery.
Flint Hills will continue operating its remaining No. 2 crude unit, which produces jet fuel, gasoline, asphalt and some specialty fuels. Refinery spokesman Jeff Cook said the remaining unit should be able to compensate for the idled unit and that the company will still be able to meet its contractual commitments.
Brose said operating a single crude unit gives the North Pole refinery the best opportunity to survive as it pursues a cheaper energy source.
Flint Hills launched a partnership with Golden Valley Electric Association last August to truck liquefied natural gas from the North Slope. That effort, which isnt expected to provide gas until 2014, is envisioned as a way to slash energy costs.
Cook said the refinery and GVEA are moving ahead with that plan and that Flint Hills hopes it will offer cheaper power that will eventually allow it to restart its idled refinery units.
Thats certainly our hope to be in a position where we can lower our energy costs, Cook said.
The project will require construction of a plant to liquefy natural gas on the North Slope, along with a storage facility that will return it to gaseous form in North Pole. A fleet of about 40 trucks will be needed to transport gas between those two points along the Dalton Highway each day.
Meanwhile, Cook said, the North Pole refinery is struggling in an already challenging environment. According to Flint Hills, 16 refineries have closed in North America and Europe during the last several years.
Fairbanks North Star Borough Mayor Luke Hopkins said the move by Flint Hills is another example of the damaging effect of expensive energy on the Interior.
If we dont get lower-cost energy here, its going to continue to be these impacts on our economy, our community, our families, he said.
Sen. John Coghill, whose district includes the refinery, said the announcement is another reason why getting affordable natural gas to the Interior should be a top priority for lawmakers.
A lot of people think that Flint Hills is gouging, but they live in the same high cost environment as the residents, he said. We need to get some natural gas down here so we can reduce the home heating and the cost to run our refineries.
The employees affected by the layoff plans will have opportunities to apply for other positions within the company, according to the Flint HIlls news release. Those who dont shift to other jobs in the company will receive severance packages and support finding work, according to the company.
Flint Hills Resources, which is based in Wichita, Kan., has 151 employees at its North Pole refinery. It purchased the refinery in April 2004.
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North Slope oil yesterday was $118.77 a barrel.
So while refineries using natural gas as an energy source see prices of under $2 per million BTU, this refinery was paying over $21 per million BTU.
No one in Wichita could ever understand why Charles agreed to buy this dog...
Good! I wish that all the oil companies would destroy the essential parts along with the blueprints for them,destroy their refineries and let these bastards that are always griping about “big oil” destroying the environment,making outrageous “profits” could go back to living like they did in the middle ages. Let them see who would pay their welfare checks them. Whether it is form a government funded university professorship or in “public” housing fornicating and doing dope.
If the gas pipeline was in now, either to Canada or to Valdez, this plant would have all three units running today.
Depending on Alaska politicians is a very risky business.
The comments at ADN show how clueless many are and incapable of doing math.
North Pole ping
As a reference point, I’ve seen older refinery use 0.7 million BTU per barrel of oil processed in South Texas.
Newer or upgraded refineries can reduce well below that, but some are even worse.
If the raw energy cost alone of refining the crude oil are $15 a barrel, there is no way to be cost competitive, even against refineries barging fuel up from Washington State.
I did not know the refinery burned crude oil to operate.
That’s gotta be a huge disadvantage.
No natural gas in the area has been commercially produced.
The pipeline does have the advantage that they don’t have to deal with their residual oil. They just put it back into the pipeline and it is blended in with the crude sold to the rest of the West Coast. The pipeline gets the advantage of significant added heat at this point.
They could sell that resid in the USGC for more than WTI (if they could get it there.)
It adds to the pipeline. I’m sure it is not a free give-away.
I recall the NP refinery once had a hammer lock on the jet fuel biz but some new entrant took away most of this business.
how far is the round trip..?
thanks in advance.
It is most likely moved on barges from Washington State. All of the other refineries in Alaska are rather small.
Jet Fuel is big business in Alaska. Lots of Cargo 747 going stopping for a fill up between Asia and Lower 48. They sell about 3 times as much Jet Fuel in Alaska than Gasoline OR Diesel, Fuel Oil and Kerosene combined.
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They should hired me as a consultant. I would have told them that transportation and freight costs would have killed them.
And you would have been wrong.
This plant is not economical due to requiring North Slope Alaskan Crude as their power source as well as their feedstock.
If they were using Natural Gas for heat and electrical power, they would be doing just fine.
The market is in Alaska and the feedstock is in Alaska. They are losing out to refineries that actually take Alaskan crude, ship it to Washington, refine it and barge it back to Alaska.