UPDATE 3-Troubled Motiva refinery crude unit shut by small fire
* Repairs to fractured pipe could take several days, sources say
* 325,000 barrel per day crude unit was in process of restarting
* New crude unit had previously been shut due to corrosion issue
* Gasoline prices jump on fire, pare gains after damage report
By Erwin Seba
PORT ARTHUR, Texas, Dec 12 (Reuters) - Motiva Enterprises aborted the restart of a major new crude oil unit at its Port Arthur, Texas, plant after a fractured pipe caused a small fire late on Tuesday, the latest glitch to bedevil the country's biggest refinery.
The fracture on a line that feeds pre-heated crude into the 325,000 barrel per day (bpd) unit should not take more than "several days" to repair, a source familiar with operations at the plant told Reuters. No formal timeline has been set and investigation crews are expected to start work on Wednesdya.
Reports of the fire helped cause U.S. gasoline and heating oil futures to jump by nearly two percent in early trade. Gains ebbed after it was clear that the outage was not likely to be as severe as the chemical corrosion in June that forced the unit to close for the past six months.
Motiva was in the process of restarting the crude unit and had expected it to be fully operational by early 2013.
Kimberly Windon, a spokesman for Motiva, a joint venture of Saudi Aramco and Royal Dutch Shell, said the unit remains on track to fully restart by early 2013 despite the shutdown.
Windon confirmed that a "very small" pipeline leak and fire had occurred around 10 p.m. CST on Tuesday. She said that it was quickly extinguished and that the unit was safely shut down without suffering any damage.
"We anticipate making the necessary adjustments/repairs and returning the unit to normal operations in an expeditious manner," she said in an email.
The fire isn't believed to have caused significant damage, the sources told Reuters, but it spooked traders fearing that another prolonged disruption could impact fuel production and supplies along the Gulf Coast, the U.S. refining hub.
"The additional supply is sorely needed, and the plant's apparent fragility has made the market nervous that full operation may still be a ways off," said John Kilduff, partner at Again Capital LLC in New York.
However, the U.S. Energy Information Administration said on Wednesday that Gulf Coast gasoline stocks gained 1.7 million barrels last week, on top of a 2.4 million-barrel build the week before, on refinery utilization of 95.4 percent.
While cash gasoline differentials saw a small gain in early trade on the Motiva news, they later held steady at double-digit discounts to January RBOB futures on the New York Mercantile Exchange.
U.S. gasoline futures rose to nearly $2.67 a gallon in earlier trading, before retreating to around $2.64 a gallon by late morning after the EIA data showed that U.S. gasoline stocks rose by a larger-than-expected 5 million barrels last week.
The disruption in operations at Port Arthur was first reported by industry monitor Genscape, which said it had detected "significantly decreased" activity at the plant's crude and vacuum distillation units. The fire was first reported by industry publication Energy News Today.
The aborted restart could compound woes for the plant's owners, who have spent around $10 billion over five years to expand Motiva into the nation's biggest plant.
The VPS-5 crude distillation unit - a key component of the expanded 600,000 bpd refinery - has suffered several setbacks since it first began processing crude in April.
"The reason this start-up is given such importance is that it's really the largest refinery start-up in U.S. history," said John Auers, senior vice president and refining specialist at Turner, Mason & Co. in Dallas.
He said preliminary reports suggested that the incident wouldn't affect his forecast for the plant to fully resume operations in the first quarter. And while it's not uncommon for a refinery to experience operational hiccups, he said oil traders may "start to wonder whether it is a trend".
The unit was initially shut down in early June to investigate a small leak. In the process of restarting it after brief repairs, caustic sodium hydroxide that had leaked into the system was vaporized, cracking and pitting some of its piping. Tuesday night's fire occurred on the same feeder pipeline that was the original source of June's trouble, the sources said.
The unit is designed to do the initial refining of crude oil coming into the refinery and to provide feedstock to other units. In addition to boosting plant capacity, VPS-5 is intended to allow Motiva to process a wider variety of crude oils.
The sodium hydroxide - normally mixed with heavy, sour crude oil to prevent fouling equipment - caused widespread corrosion after being vaporized as the unit was being restarted. It required six months of repairs using stainless steel components that would resist a similar leak.