(Updates story throughout)
March 4 Delta Air Lines Inc said on
Monday it is expects to produce 40,000 barrels-per-day (bpd) at
its 185,000 bpd Trainer, Pennsylvania refinery by the end of the
year, a lower rate than a goal first proposed when it bought
the refinery last year.
Delta President Edward Bastian said in a JPMorgan
presentation that the 40,000 bpd output represented about 25
percent of Delta's domestic jet fuel consumption and about 22
percent of the refinery's current capacity.
The Atlanta-based airline originally said it expected to
spend about $100 million to increase jet fuel production at the
refinery to 52,000 bpd, or about 32 percent of capacity, while
reducing gasoline production.
The refinery, owned by Delta subsidiary Monroe Energy,
began making jet fuel last September and by early November was
up to about 30,000 bpd, a source familiar with refinery
operations told Reuters at the time.
It was unclear whether Delta has reduced its target for jet
fuel production at the refinery. A Delta spokesman was unable to
Regardless, the refinery is expected to be operating at full
capacity this week, Bastian said. It had been operating at 75
capacity for most of the first quarter because of operational
issues, he said. "Yet we still expect to break even on the
facility in the (first) quarter," Bastian said.
Delta bought the refinery last year from Phillips 66
in a bid to gain more control over its fuel costs, saying it
expected to save about $300 million annually off its yearly fuel
bill of $12 billion.
"There's evidence here that we're going to make this work
for us; but like anything that's big and new and different, it's
taken us a little bit longer to turn on than we thought,"
Had the facility been running at full capacity in the first
quarter, Bastian said Trainer would have likely produced a
profit of $60 million.
He expects Trainer to turn a profit of $75 million to $100
million during the second quarter.
Delta is taking steps to make the refinery more profitable.
These include shipping low-cost crude oil by rail from North
Dakota's Bakken shale to replace more expensive crude from the
North Sea and Africa.
Other East Coast refiners, such as PBF Energy, have
already taken similar steps. PBF recently began receiving crude
oil shipments by rail at its 182,000 bpd Delaware City, Delaware
Delta's Trainer refinery received its first crude-by-rail
shipment in February. The airline expects to begin receiving a
regular supply of crude-by-rail from the Bakken region by
mid-2013, according to Bastian's presentation.
(Reporting by Cezary Podkul and Karen Jacobs; Editing by Gerald
E. McCormick and Marguerita Choy)