NEW YORK (Reuters) - The second-largest refinery on the East Coast has suffered “some” flooding and a power outage from Hurricane Sandy, while two smaller plants also lost power, as glitches threaten to slow the recovery in fuel supplies.
While the region’s biggest plant, in Philadelphia, and several others were ramping up operations after escaping damage, other facilities, pipelines and terminals were struggling to restore supplies that had slowed to a trickle.
Phillips 66 said there was “some flooding in low-lying areas” of its 238,000-barrels-per-day Bayway, New Jersey plant, which had been shut on Monday as a precaution. The plant remains closed, the company said, and utility PSE&G said power was likely to be restored only in 24 to 48 hours.
News of trouble at Bayway, nicknamed the “gasoline machine” for its key role in supplying motor fuel to the New York City area, pared losses in gasoline futures, which had fallen by more than 2 percent as output recovered elsewhere.
Other power-related glitches also surfaced after the storm, which left more than 8 million customers without electricity.
As the storm moved north, a power outage shut Imperial Oil’s 121,000-bpd Sarnia, Ontario refinery, but the company said it expected to restart units later in the day.
Hess Corp’s 70,000-bpd Port Reading, New Jersey refinery, which had also shut ahead of Sandy, lost power and had no time frame for restarting.
Colonial Pipeline, a conduit that supplies as much as 15 percent of the East Coast’s 5.2 million bpd of gasoline, diesel and fuel demand from Gulf Coast refiners, said the line had suffered no operational damage, but it had lost power at its Linden, New Jersey tank farm. It is bringing in portable generators to resume pumping fuel back to the region.
The flooding at Bayway, which had been seen by experts as the most vulnerable to Sandy’s record 13-foot (4-meter) storm surge and subsequent power outages, is a potential second nightmare for Phillips 66, which had struggled to restore its Alliance, Louisiana refinery after Hurricane Isaac in August. That storm pushed more than 2 feet of floodwater into the plant.
Operations in the Philadelphia area appeared set to resume quickly. Philadelphia Energy Solutions’ 330,000-bpd refinery, the biggest in the region, escaped damage and was restoring operations at the Point Breeze half of the plant that was shut, the company said, confirming a Reuters report.
Industry group Genscape said its infrared cameras detected the restart of key crude and vacuum distillation units.
Delta Air Lines subsidiary Monroe Energy’s 185,000-bpd Trainer, Pennsylvania plant operated through the storm, and was expected to reach full rates next week after a maintenance overhaul, a source with knowledge of operations said.
PBF Energy was ramping up its Delaware City refinery after minimal run-cuts, another such source said. A company spokesman confirmed reports that the plant had flared briefly, but said the incident had not affected operations.
Delaware City and PBF’s 180,000-bpd Paulsboro plant in southern New Jersey, which had throttled back to reduced rates ahead of Sandy, “ran well through the storm”, spokesman Michael Karlovich said.
He said personnel had completed a “thorough assessment” of the facilities, and that PBF would not provide further updates on logistics or operations.
The precautionary refinery closures were more widespread than during Hurricane Irene in August 2011, when only the Bayway plant shut completely.
John Auers, senior vice president and refining specialist at Turner, Mason & Co in Dallas, said East Coast plants, even those near the water, are better protected from potential flood damage than those that suffered weeks-long outages on the Gulf Coast following hurricanes Katrina and Rita seven years ago.
Still, even minor flooding can be a concern and plants without sufficient on-site generators may have to wait for utilities to restore outside power. The largest risk may simply lie in restarting vast, intense equipment.
“You’re talking about heating up oil to fairly high temperatures, putting it through processing units at high pressure,” Auers said. “Anytime you interrupt that steady-state there is always the potential for issues.”
The vast network of terminals and smaller pipelines that serves the region - seen as a potentially greater danger than refinery outages - was also being assessed.
NuStar Energy said it could not access its Linden, New Jersey terminal, while Magellan Midstream Partners said it would resume loading at two truck racks in Delaware and Connecticut later in the day.
Barring major damage, most experts expected the region’s fuel supplies could bounce back quickly after being almost completely halted ahead of Sandy, which came ashore on Monday evening with winds of up to 90 miles per hour (145 km per hour) and the storm surge, causing widespread power outages.
Benchmark New York gasoline futures prices, which rallied more than 6 percent before the storm as traders feared a disruption in supplies, were still down 1 percent or three cents on Tuesday as the focus shifted to the likely cut in fuel consumption due to grounded flights and empty roads. U.S. crude oil futures rose slightly, reversing Monday’s dip.
“For the moment you have a big black hole where there used to be oil demand,” said Credit Suisse oil analyst Jan Stuart. He said 80 percent of demand in the New York metropolitan area had been affected somehow.
“In the end, the demand deficit outweighs the supply deficit.”
Airlines had canceled more than 15,770 flights in the past four days, flight-tracking service FlightAware said. Jet fuel consumption of an estimated 170,000 bpd at the three major New York area airports ground to a halt.
One trader offering to sell physical cargoes in the New York Harbor market found no buyers on Monday.
Major ports that supply the area with some 1 million bpd of imported fuel were starting to reopen. The Port of Boston opened without restrictions and was expected to unload a gasoline cargo later on Tuesday, an official said.
Reporting by Janet McGurty; Additional reporting by Jonathan Leff and David Sheppard in New York, Jeffrey Jones in Calgary; Editing by Michael Urquhart, Chizu Nomiyama, Leslie Gevirtz and Dale Hudson