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Oil & Gas

Four East Coast refiners shut, cut rates as Sandy nears

October 30, 2012
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NEW YORK — The second-largest refinery on the East Coast was shutting down on Sunday and three other plants cut output as Hurricane Sandy threatened widespread power outages and a massive storm surge across the region, according to a report from Reuters.

Phillips 66 has begun shutting its 238,000-barrels-per day (bpd) Bayway, N.J. refinery, nicknamed the "gasoline machine" because of its key role supplying motor fuel to the New York City area. The plant is the only one to close during Hurricane Irene last year.

The region''s biggest refinery, Philadelphia Energy Solutions'' 330,000-bpd facility in Philadelphia, has begun to reduce rates, according to a source familiar with the plant. The refinery had shut an acid unit but it was unclear by how much rates had been cut at the other units.

PBF Energy reduced output at its Delaware plant and Hess Corp curbed runs in New Jersey, sources said, as Sandy affected operations at refineries that account for two-thirds of the East Coast''s 1.2-million-bpd capacity.

While major refineries are built to withstand hurricane-force winds, they are vulnerable to power outages, which can damage units in the case of a "cold shutdown", as well as flood damage if the storm surge accompanying Sandy - forecast to be as high as 11 feet - breaches their defenses.

Oil traders were already factoring in a potential squeeze on fuel supplies. Benchmark gasoline futures jumped 1 percent and heating oil rose 0.6 percent as New York Mercantile Exchange (NYMEX) trading began on Sunday evening, U.S. time. Crude oil prices dipped by 0.4 percent.

Hurricane Irene, which hit the region in August 2011, caused severe flooding and power outages along the East Coast as well as some refinery disruptions. Phillips 66 closed the Bayway refinery while other refiners cut rates, but the oil industry escaped Irene with relatively little, if any, damage.

Other industrial facilities were also affected. Dow Chemical Co said it would temporary close three plants in New Jersey ahead of Hurricane Sandy, as well as its East Coast headquarters in Philadelphia and a research facility nearby.

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