August 29, 2019 / 8:12 PM / 17 days ago

U.S. refinery overhauls to peak in early October: IIR

HOUSTON (Reuters) - Production losses for U.S. refiners from planned fall overhauls of distillation capacity will peak in early October, according to a Reuters analysis of IIR Energy data, while leaving output well above the level of a year ago.

FILE PHOTO: An aerial view of the Shell Deer Park Manufacturing Complex is seen in Deer Park, Texas, U.S. August 31, 2017. REUTERS/Adrees Latif/File Photo

Refiners plan to pare about 1.6 million barrels per day (bpd) distillation capacity, or 8.5% of the U.S. total, during fall turnarounds, about 400,000 bpd below that reached a year ago, according to the IIR Energy data. Total U.S. distillation capacity is 18.8 million bpd, according government data.

Typically oil refiners shut units for planned equipment overhauls called turnarounds in the fall and spring. Originally, these updates would reconfigure refineries to produce motor fuel optimized for winter or summer driving. Now they are to assure reliability.

Crude distillation units (CDUs) break down crude oil into unfinished motor fuels and feedstocks for all other refinery units.

Two-thirds of the planned capacity reductions take place along the U.S. Gulf Coast, home to the largest concentration of U.S. refineries, the data show.

The largest U.S. refinery, Motiva Enterprises’ [MOTIV.UL] 607,000 bpd Port Arthur, Texas, plant, will shut its 325,000 bpd VPS-5 CDU next week for a 60-day overhaul.

Part of the work will repair piping damaged by a sodium hydroxide release that occurred soon after the crude unit went online in 2012.

The overhauls are fewer than last year in part because refiners are putting off maintenance to ramp up production of very low sulfur fuel oil (VLSFO), said people familiar with the matter. The less-polluting fuel will be mandated on all ocean-going vessels without emissions scrubbers beginning Jan. 1, under an International Maritime Organization rule.

Refiners expect the low-sulfur switch to generate higher profits because of tighter gasoline supplies as some of the feedstocks used to produce the motor fuel are diverted to make VLSFO.

Royal Dutch Shell Plc in mid-September will shut the large CDU at its 275,000 bpd Deer Park, Texas, plant for most of the two-month overhaul, said people familiar with operations.

Motiva is counting on profits from the lower sulfur fuel to pay for an expansion of petrochemical production capacity at its Port Arthur refinery.

More than 300,000 bpd in gasoline-producing fluidic catalytic cracking unit (FCCU) capacity will be off-line in the Fall turnaround season this year, well below the total in Fall 2018, according to IIR.

The largest refinery in the Midwest, BP Plc’s 430,000 bpd Whiting, Indiana, refinery will shut the smaller of two FCCUs next week for an overhaul scheduled to last about a month.

Reporting by Erwin Seba in Houston; additonal reporting by Jessica Resnick-Ault in New York; Editing by David Gregorio

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