co-UPDATE 2-Louisiana refineries likely to keep running

Mon May 16, 2011 5:16pm EDT

Related Topics

* Most Mississippi River refineries say operations normal

* Spillway opening spares major refineries

* Shell says preparing Morgan City terminal for flood

(Recasts with senator comments, Add Exxon comments on SPR,changes dateline to Morgan City)

MORGAN CITY, Louisiana, May 16 (Reuters) - Eight large Louisiana refineries equal to 12 percent of national capacity, appear to be at lower risk of flooding after U.S. Army engineers opened a key floodgate over the weekend, Senator Mary Laudrieu said on Monday.

Over the weekend the U.S. Army Corps of Engineers opened the Morganza Spillway to channel water away from the Mississippi River and into the Atchafalaya River basin.

"It looks as though, with water being diverted through the Morganza, it's giving some relief to the main channel of the Mississippi," Landrieu said after viewing flood preparations in Morgan City. "Hopefully we can keep (the refineries) open."

Opening the spillway put Alon USA Energy's (ALJ.N) 80,000 barrel per day Krotz Springs, Louisiana, refinery in the path of flood waters expected to pour down the Atchafalaya River Basin, covering the region in water up to 20 feet deep.

During the past two weeks, refinery employees, Louisiana National Guard troops and Krotz Springs residents have labored to build levees around the town of 1,150.

Alon said on Monday the Krotz Springs refinery should be safe from flooding, which the company had said could cause a shutdown.

"The existing and new levees and secondary layers of protection should do the job," said Alon Chief Operating Officer Joseph Israel in an email.

The eight refineries along the Mississippi River between Louisiana's capital Baton Rouge and Meraux, Louisiana, have a combined refining capacity of 2.15 million bpd, equal to 12 percent of U.S. refining capacity.

The opening of the Morganza Spillway to relieve flooding along the Mississippi could also create logistical headaches for big Gulf Coast refiners, analysts have said. [ID:nN15127280]

The tanker docks at Exxon Mobil Corp's (XOM.N) 504,500 bpd Baton Rouge refinery, the nation's second largest, were shut over the weekend, cutting off a supply of crude to the plant.

Exxon said on Monday it had not contacted the U.S. Energy Department about possibly receiving crude from the Strategic Petroleum Reserve for the refinery.

"The short answer is no," said Exxon spokesman Kevin Allexon. "We have invested significant resources to prepare and plan for this situation."

Production at the refinery has been cut by about 10 percent due to tight crude supply, sources have told Reuters.

Flood waters were receding from around Valero Energy Corp's (VLO.N) 180,000 bpd Memphis, Tennessee, refinery, which continued operating during the height of flooding on the upper Mississippi last week, according a company spokesman.

Other Louisiana refineries said operations were normal while they continued to monitor river levels.

Royal Dutch Shell Plc (RDSa.L) said on Monday it was preparing its Morgan City, Louisiana, terminal for flooding. Morgan City is at the south end of the Atchafalaya River. (Reporting by Kristen Hays in Morgan City; Writing by Erwin Seba; Editing by Cynthia Osterman)

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