LONDON (Reuters) - Ineos has begun shutting units at its Grangemouth oil refinery in Scotland due to the unplanned outage at its Forties North Sea crude pipeline, which threatens to choke the plant’s feedstock, industry sources said on Wednesday.
The company is also considering bringing forward maintenance work at Grangemouth, originally scheduled for next year, to have it done while units are down, the sources said.
The disruption to operations at Grangemouth follows the unexpected shut down of Ineos’s Forties pipeline early this week after a crack was found. The pipeline carries about 450,000 barrels per day (bpd) of Forties crude, roughly a quarter of the North Sea’s total output, and its closure for repairs sent global crude prices soaring to a two-year high.
Trade sources said Ineos shut a 65,000 barrels per day crude distillation unit at the Grangemouth refinery on Wednesday and plans to shut another 110,000 bpd unit there early next week.
Ineos said it was still considering repair options on the Forties pipeline and reiterated any repairs would take several weeks.
“Ineos could keep the Grangemouth refinery running but at a fair cost,” one of the trading sources, familiar with the plant’s operations, said.
Moving maintenance forward now appears the most likely option, but nothing has been decided. For one thing, it was unclear if maintenance crews were available on short notice, he said.
“Imports will kill a pretty much non-existent (refining) margin,” another source said, also adding that it wasn’t clear yet if maintenance work would be moved forward.
The original plan was to perform maintenance on the Grangemouth diesel-making hydrocracker throughout March 2018, and to shut down a crude distillation unit and a diesel hydrotreater from April 1 to May 13, 2018, the sources said.
Regional refinery margins, which move inversely to crude oil prices, declined to their lowest since March 2016 after the Forties pipeline was shut down, according to Reuters data.
Grangemouth stopped offering some oil products, including jet fuel, on Tuesday in the wake of Forties Pipeline System (FPS) outage, traders said.
Amrita Sen, chief oil analyst at consultancy Energy Aspect, said the 200,000 bpd refinery imported a maximum of 120,000 bpd of crude oil, mostly from West Africa, this year from the nearby Finnart oil terminal northwest of Glasgow. The rest of its crude supplies came through the FPS.
“The issue for Grangemouth is to make up for lost FPS volumes via imports. That faces both infrastructure constraints but also long transit times of around 20 days which may mean the refinery has to reduce runs if the FPS outage is prolonged,” Sen said.
Ineos did not immediately reply to a request for comment about plans for the refinery.
Additioanal reporting by Libby George; Editing by Mark Potter and Susan Fenton