UPDATE 5-Fire hobbles Motiva oil refinery, biggest in U.S.
* 'Feeling snake-bit' * Second fire in week * Vibration problem lingers (Adds details on shutdowns, previous fire and lingering pipe problem) By Erwin Seba PORT ARTHUR, Texas, Aug 19 (Reuters) - A fire at the largest oil refinery in the United States has knocked out more than half of its output for at least two weeks, the latest in a string of mishaps following a $10-billion expansion at the Motiva plant in Port Arthur, Texas. Royal Dutch Shell Plc - which owns the refinery with Saudi Aramco - said the fire on Saturday, the second in a week, slowed and shuttered units at the 600,000 barrel-per-day plant and hurt production. The fires come on top of a nagging vibration problem with a key pipe in the plant's biggest crude distillation unit, or CDU, that is expected to keep it running well below capacity for more than a year, Reuters reported exclusively on Friday. The vibration problem surfaced shortly after the CDU was restarted early this year following 7-1/2 months of work to repair damage caused by a chemical leak that happened only weeks following the plant's opening in late April 2012. Sources said refinery managers spoke of their frustration on Monday with problems that have plagued the expanded plant. "It was a bad weekend for us," said one source. "We're all feeling snake-bit. It just seems like we get up and going and then something else goes wrong." Markets had a muted reaction to the outage of the plant, which accounts for 3.4 percent of U.S. refining capacity. Gulf Coast wholesale gasoline and ultra-low sulfur diesel prices relative to the New York Mercantile Exchange rose slightly as the region's many refineries ran nearly full bore, keeping already robust inventories high. HYDROCRACKER BLAMED Sources familiar with work at the plant said on Monday the fire broke out in a hydrocracker unit next to the largest of the refinery's three crude distillation units, known as VPS-5. The 325,000 bpd VPS-5 unit was placed on warm circulation on Sunday because of the hydrocracker shutdown. The VPS-5's vacuum section produces a large volume of vacuum gasoil, which the neighboring hydrocracker refines into motor fuel. It was necessary to shut the CDU because the hydrocracker could not take the vacuum gasoil it normally does. A refining unit on warm circulation is kept at high operating temperatures and continues to have oil circulating through it, but does not produce fuel. The 110,000 bpd naphtha hydrotreater was also shut briefly but was restarted Sunday night, said energy industry intelligence service Genscape. The fire damaged communication lines and instrumentation needed to run the 75,000 bpd hydrocracker, but its production sections were unharmed, the sources said. The hydrocracker boosts output of motor fuel by refining feedstocks under high pressure with hydrogen. "Several units that are integrated to this will run at reduced rates and others are being shut down" while repairs are underway, Shell spokeswoman Kimberly Windon said. Windon added there were no related injuries at the plant. Shell did not provide additional comment on what sources said would be outages of at least two weeks. SERIES OF SETBACKS The weekend fire was the most recent in a list of setbacks at the refinery. The VPS-5 crude distillation unit is expected to run below capacity by nearly 75,000 bpd for more than a year because of vibration in a crucial pipe, which has occurred when Motiva has attempted to run it at or near its full capacity. The company may shut the crude unit in fall 2014 to fix the persistent vibration problem, sources told Reuters on Friday. The unit has been running at reduced rates ranging between 250,000 bpd and 285,000 bpd since it restarted production early this year. The CDU was damaged by a chemical leak in June 2012 that caused months of delays about a month after initial start-up following five years of construction. A week ago, a blaze shut the sulfur recovery unit and led to a reduction in refinery production at the plant. The sulfur unit is slated to be down for two to three weeks. In that incident, a hole 5-feet long (1.5 meters) and 1-foot wide (30.5 centimeters) was melted in the side of the unit that removes sulfur from hydrogen sulfide gas produced in the refining of crude oil into motor fuels. "It is not unusual for a sulfur unit to have problems, especially at the biggest refinery in the United States. It is a bad place to have an issue because once it's shut down you'll have to shut other units like hydrotreaters that feed into it," said John Auers, refinery specialist with Turner, Mason & Company in Dallas. (Additional reporting by Selam Gebrekidan in New York and Kristen Hays in Houston; Editing by Terry Wade, Andrew Hay and Dan Grebler)