Processing Magazine

Delta buys a refinery in bid to cut its fuel bill

May 1, 2012

The Associated Press reports, Delta Air Lines is buying a refinery in an attempt to reduce its escalating jet fuel bill. The airline said Monday that it is buying the refinery near Philadelphia for $150 million from Phillips 66, a refining company being spun off from ConocoPhillips. The refinery has struggled to make money, and ConocoPhillips planned to shut it down if it couldn''t find a buyer. Fuel is the largest and most volatile expense for the major airlines. They paid an average of $2.86 a gallon for jet fuel last year, up from $2.09 in 2007, according to statistics from the Bureau of Transportation.

Delta''s Monroe Energy LLC subsidiary will spend $100 million to make changes to the refinery to maximize the production of jet fuel. The refinery processes 185,000 barrels per day of crude oil. Delta said it will make 52,000 barrels per day of jet fuel once it''s modified. Delta said it will trade the gasoline, diesel and other products of the refining process with BP and Phillps 66 locations around the U.S for another 120,000 barrels per day of jet fuel.

The deal also includes pipelines that will help move the jet fuel to Delta''s operations in the Northeast, including its hubs at LaGuardia and JFK airports in New York.