* Phillips 66 says Bayway restart could take 2-3 weeks
* Gasoline lines shrink as terminals operations resume
* Supply worries remain in New York, New Jersey
* 10 of 57 terminals in Sandy's path still shut -Energy Dept
By Selam Gebrekidan
NEW YORK, Nov 5 The steady recovery in the New York Harbor's energy network hit a bump on Monday, one week after powerful storm Sandy ripped through the eastern seaboard, after Phillips 66 said its New Jersey refinery will not return to service for two to three weeks.
Last week, storm surges flooded the 238,000 barrel-per-day Bayway refinery in Linden, New Jersey - the second largest in the region - and spilled 185 barrels (7,700 gallons) of oil, which is being cleaned up by the company and authorities. An adjacent terminal is ramping up operations and could reach full rates by the end of the week, the company said.
Save for that setback, the region's energy network made steady progress toward recovery on Monday. More supplies arrived in New York and New Jersey via barges and restarted pipelines. Miles-long gasoline lines that infuriated drivers over the weekend ebbed on Monday. Many of the fuel terminals that dot the harbor resumed service, although at least 10 of them remained shut.
While travel group AAA estimated that more than a third of the region's retail outlets were still shut - either because they did not have power or days of panic buying had drained them - the outlook was improving by the day.
"By the end of this week we still won't be back to normal, but the situation should at least be manageable," said Ralph Bombardiere, head of the Gasoline and Repair Shop Association of New York.
"While more (stations) now have power restored, the increased demand they're seeing is emptying the tanks faster than normal," he added.
Long lines persisted in northern New Jersey, where many gas stations do not have power and are not able to connect to generators. But in parts of the state just east of New York City, only a few dozen cars were lined up at gas stations.
In New York, between 60 percent to 65 percent of gas stations were open Monday, according to AAA's estimates, but they could hardly keep up with the growing demand. Some 55 percent to 60 percent were open in New Jersey.
Any progress made unraveling the supply issues could soon be undone by a cold storm charging toward the Northeast and expected to hit the coast on Wednesday.
Heating oil terminals were returning to service in the Bronx and Brooklyn boroughs of New York City. Barge supplies to a Brooklyn heating fuel terminal, expected to arrive on Sunday night, were coming in on Monday, according to the New York Oil Heating Association.
"We're taking the supply situation one day at a time and we will have enough to last until mid-week," said John Maniscalco, who heads the association.
Hess Corp., one of the biggest retailers on the East Coast, took the unusual step on Sunday of publishing inventory levels - normally considered a commercial secret - at all of its regional stations to help motorists find gasoline.
BACK AFTER A BREAK
Suppliers in Linden, New Jersey, a major fuel hub that serves that state and New York, were revving up after mainline power returned on Sunday.
Colonial Pipeline started delivering to a third of its customer terminals from its Linden facility on Sunday, a spokesman said. The company expects five more customer terminals to resume operations this week.
Buckeye Pipeline said it had restarted pipelines that service New York City, northern New York state and New Jersey on Saturday. Nustar Energy LP resumed partial pipeline and barge deliveries from its Linden terminal.
About half of the facilities at the 16-million-barrel International-Matex Tank Terminals oil terminal in Bayonne, New Jersey, were back to normal operation on Monday night, according to Macquarie Infrastructure Co, a part owner of the terminal.
The U.S. Coast Guard opened the Arthur Kill waterway to vessels on Monday on condition they move slowly through its waters. New York Harbor is also open to vessels as long as they can find safe harbor in one of the coastal terminals.
One tanker, the Glory Express, was on the waterway on Sunday afternoon headed to Kinder Morgan's Carteret terminal in New Jersey, according to Reuters shipping data.
Hess said on Sunday night that it was expecting its first barge and pipeline shipments at its Port Reading, New Jersey, terminal. Power was partly restored to the 70,000-bpd Port Reading refinery on Saturday.
Only 10 of the 57 fuel terminals that were in Sandy's path were still shut on Monday afternoon, according to the U.S. Energy Department. But some of those were large facilities, such as Motiva's 5 million barrel Sewaren tank farm, where cleanup efforts were nearly complete after two tankers spilled 378,000 gallons of diesel into the Arthur Kill waterway.
By Monday, authorities had cleaned up 322,000 gallons of the leaked diesel, according to Larry Ragonese, a spokesman with the New Jersey Department of Environmental Protection.