Chevron eyes refinery repair after fire; gasoline jumps

RICHMOND, California (Reuters) - Chevron Corp sought to repair the core of its Richmond refinery on Tuesday, the second-largest in California, after an hours-long fire caused a 25-cent spike in regional gasoline prices on worries that it could be down for months.

A raging fire in the crude unit sent a pitch-black plume high above this populous industrial suburb across the bay from San Francisco on Monday evening, burning for over four hours before being contained by 11 p.m., and extinguished overnight, Chevron said. A small controlled burn continued on Tuesday.

As traders recalled that a 2007 fire on the same unit left the plant mostly idle for months, Los Angeles benchmark gasoline premiums spiked nearly 25 cents. This drove up the cost of what is already the nation's priciest motor fuel, in a boost to other West Coast refiners who may try to raise output as their margins touch four-year highs. Wholesale gasoline was at $3.25 a gallon.

Besides the damaged crude distillation unit (CDU), Chevron said other parts were still running at the 245,000 barrel-per-day plant, which accounts for one-eighth of California's refining capacity.

"We're working to repair the affected equipment so that we can resume normal operations as soon as we can do so safely," a Chevron official said in a statement.

With the CDU shut down, it was unclear how long secondary units -- which rely on feed from the CDU to produce finished fuel like gasoline -- can keep running.

Trade sources who saw images of the 40-foot (12-metre) flames feared the closure could last up to three months, although other experts said it was too early to say.

"There is a lot of volatile material there and so looks can be deceptive," said John Auers, a refinery specialist with Houston consultants Turner Mason. "If there is no major damage to the units, it could be a matter of days before it returns."

110 YEARS AND COUNTING

Richmond Mayor Gayle McLaughlin said she would seek a full investigation by Chevron and independent sources. Meanwhile, the Richmond Museum of History's event to mark 110 years of the refinery, scheduled for Tuesday afternoon, had to be postponed.

A total of 350 people went to the Kaiser Permanente Richmond Medical Center with respiratory concerns, but the hospital made no admissions as of Tuesday. At Doctors Medical Center in nearby San Pablo, 181 people sought help on Monday for respiratory problems and eye irritation, and more were arriving on Tuesday.

Both cities grew up in the shadow of Chevron's oldest refinery, and some wonder if the fire will sharpen debate between those who fear its environmental impact and others who say the declining industrial city needs the taxes and jobs.

"No one should have to live downwind of a dangerous oil refinery," said Leslie Fields, the Sierra Club's director for environmental justice and community partnerships.

Employing about 2,000 staff and 990 contractors, the plant is spread across nearly 5 square miles (12 sq km) in a city that covers 30 square miles.

Mohammed Abolghasem, owner of Cafe Altura in nearby Point Richmond, said when he was growing up in Iran everyone knew not to live near refineries, and he wondered whether he should move.

"I love living in this city," he said. "But next to a refinery, what do you expect?"

CRUDE UNIT

The fire started in the No. 4 crude unit, the plant's only CDU, at about 6:30 p.m., two hours after a vapor leak of a hydrocarbon "similar to diesel" was discovered, Chevron said. Workers investigating the leak were evacuated once it grew.

Updating its announcement of one injury, Chevron said three employees sustained minor injuries and were treated on site.

"We are working closely with local, state and federal government agencies to determine the exact cause of the incident," Russ Yarrow, Chevron's general manager for corporate affairs, said in a statement ahead of a town hall event in central Richmond later on Tuesday.

The impact on markets depends on how long the CDU is out. A February 17 fire at the CDU of BP's 225,000-bpd refinery in Cherry Point, Washington, led to a three-month shutdown and sent the regional price premium to above $1 a gallon in some places.

Any lengthy disruption in output could affect the supply of fuel on the West Coast, particularly gasoline, due to the difficulty in meeting California's super-clean specifications.

"Chevron will have a hard time finding replacement barrels in an already short market," said Bob van der Valk, a petroleum industry analyst in Terry, Montana. "Refineries are already drawing down summer-blend inventory in anticipation of the switch back to winter-blend gasoline."

Sulfuric acid and nitrogen dioxide were released during the incident, according to a filing with the California Emergency Management Agency. Before the fire was put out, more than 100,000 local residents had been advised to "shelter in place."

(Additional reporting by Erwin Seba and Kristen Hays in Houston, Janet McGurty in New York; Editing by Maureen Bavdek, Dale Hudson, Jim Marshall, Marguerita Choy and M.D. Golan)