Chevron California refinery repairs seen taking 1-3 months: sources

HOUSTON Thu Aug 9, 2012 11:48pm EDT

Firefighters douse a flame at the Chevron oil refinery in in Richmond, California August 6, 2012.REUTERS/Josh Edelson

Firefighters douse a flame at the Chevron oil refinery in in Richmond, California August 6, 2012.

Credit: Reuters/Josh Edelson

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HOUSTON (Reuters) - Repair work at the fire-damaged crude oil unit of California's second largest refinery may keep the unit shut for up to three months, refinery sources said on Thursday as regional wholesale gasoline prices rose to their highest since May.

Crude distillation unit (CDU) No. 4 at Chevron Corp's 245,000 barrel per day San Francisco Bay area refinery in Richmond, California, was shut by a Monday night after a fire erupted at a pump leaking a substance similar to diesel, according to a preliminary report the company filed with county pollution regulators.

Chevron spokesman Sean Comey said there was no estimate available for when the CDU, the only unit of its kind in the refinery, would resume production. All other units at the refinery continue to operate, making gasoline, diesel and jet fuel at reduced levels, he added.

West Coast refined products traders said the refinery's fuel production was at least 50 percent of capacity. Comey declined to discuss the refinery's output.

"We're meeting 100 percent of our clients' demand for gasoline," he said.

Gasoline prices in the San Francisco wholesale spot market rose 5 cents on Thursday to a 40-cent premium over September NYMEX RBOB gasoline, a level not seen since May when regional prices were retreating on the restart of a crude unit repaired after a fire at BP Plc's Washington state refinery.

Monday's fire at the Chevron refinery damaged the only atmospheric tower on the CDU, the unit that begins converting crude oil to motor fuel. The CDU makes feedstock for all other units at the refinery.

The other units can remain in operation as long as Chevron is willing to obtain intermediate feedstocks for those units. Comey declined to say if the subsidiary production units were operating with feedstock on-hand or purchased from other producers.

A more detailed estimate of repairs is expected once Chevron workers are able to get to the atmospheric tower.

An order by California's Occupational Safety and Health Administration (Cal/OSHA) prevents access to that part of the CDU until Chevron develops a plan for safe access to fire-damaged areas. That plan should be complete within days.

Monday night's blaze sent 949 area residents to an area hospital complaining of respiratory problems and eye irritation among other symptoms.

The blaze broke out as workers and the refinery's fire department were evaluating the leak at the pump, according to the report Chevron filed with the Contra Costa County Hazardous Materials Program.

During Alon USA Energy Inc's second-quarter earnings conference call on Thursday, Deutsche Bank analyst Paul Sankey asked executives how they thought California gasoline markets would react to a six-month refinery outage, even though the entire Richmond plant wasn't shut down.

Alan Moret, senior vice president of supply, said the West Coast had faced "shortages of significant magnitude in the past," and that such an extended outage with operations at reduced rates for even longer could see the region switch from exporting gasoline to importing it.

"Clearly, I would be speculating on whether this is going to happen of that magnitude. But these stocks can come into the West Coast and, obviously, the West Coast exports some products today. You would expect those exports to disappear."

(Reporting by Erwin Seba and Kristen Hays; Editing by Bob Burgdorfer and David Gregorio and Miral Fahmy)

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