logo
Breaking News

Floods threaten U.S. oil refineries; stirs memories of 2011 damage

By For Citizen Digital

Floods threaten U.S. oil refineries; stirs memories of 2011 damage
Floods threaten U.S. oil refineries; stirs memories of 2011 damage

Record floods across the Midwestern United States are threatening oil refineries and pipeline operators from Illinois to Louisiana, potentially swelling the glut of domestic crude at a time when inventories have already surged to record highs.

The floods have rekindled memories of a historic deluge five years ago that affected 13 percent of U.S. refining capacity.

Also Read:

This time, two pipelines that feed Phillips 66’s <PSX.N> Wood River refinery in Illinois have closed as a precaution while at Memphis, Tennessee, Exxon Mobil Corp <XOM.N> was making preparations for possible closure of its refined products terminal and Valero Energy Corp was preparing for possible flooding its refinery.

The closures come as the domestic market remains awash with crude, with Cushing inventory hitting all-time highs last week. On Wednesday, data showed crude inventories rose by 2.6 million barrels in the week as relatively high U.S. futures prices lured increased imports and distillate demand weakened.

“We can take what happened in 2011 as a guideline for what will happen in 2016,” said John Auers, Senior Vice President at refining consultancy Turner Mason & Co. In Dallas.

Record flooding in 2011 affected 2.3 million barrels per day of U.S. refining capacity, though only one plant was closed and two others reported production cuts. This time, floodwaters are expected to crest at the third-highest point on record in Cairo, Mississippi, north of some of the nation’s largest refineries.

During 2011 flooding along the Mississippi River, hundreds of homes were evacuated and 20 people died as the river approached record levels last seen in the 1920s.

Those floods, triggered by abnormally high snow-melt and compounded by heavy rains in April and May, prompted precautionary shutdowns at some refineries, while others lost access to the Mississippi by river closures. The flooding impacted plants including Exxon Mobil Corp.’s 502,000-barrel-a-day Baton Rouge, Louisiana, refinery.

Once again, barge traffic near refineries is expected to slow as portions of the river are shuttered and locks and dams are closed. As in 2011, the levies around refineries are generally expected to prevent flooding inside the plants, so the focus is primarily upon disruptions to crude supply and product distribution.

“All of this water will be coming down to the Louisiana region,” said Bob Anderson, a spokesman for the U.S. Army Corps of Engineers.

“It will be closer to the middle of the month before it starts to impact the Louisiana region,” he said. The crest will hit Cairo, Mississippi on about Jan. 4, and move to Baton Rouge around Jan. 15, with impact on the Gulf Coast by the end of the month, he said.

Baton Rouge is home to a major Exxon Mobil Corp. refinery, while Louisiana’s Gulf Coast houses plants owned by Marathon Petroleum Corp., Motiva Enterprises, and others.

The high waters have already approached the St. Louis area, where the WRB Refining plant in Wood River is located, as well as Memphis, where Valero Energy Corp. may have difficulty getting crude to its plant as a result of the high waters.

“For companies like WRB and Valero in Memphis, their operations will be impacted from their ability to get crude into the refinery and products out,” said Andy Lipow, a Houston-based consultant. In both of these cases, high water will also challenge the refiners’ ability to distribute gasoline from their plants.

Further impact could be seen as the wall of water moves south, challenging companies that ordinarily use barges to secure crude for their refineries, and posing a hurdle for Louisiana-based refiners that ship their products to Florida.

“We should anticipate a similar type of event to 2011, with docks in the Mississippi River under water,” he said.

The impact could ripple through the market, said John Paisie, Executive Vice President of Stratas Advisors in Houston. “It could have a more significant impact, both on the build of crude, which would put further pressure on the crude price, and it also could put upward pressure on gasoline.”

For Citizen TV updates
Join @citizentvke Telegram channel



Video Of The Day: Rwanda yapiga hatua utekelezaji marufuku ya plastiki


By Agencies More by this author


Most Recent



Sponsored Content