Philadelphia Refinery Closure to Increase Fuel Imports, Pipeline Use

Researched by Industrial Info Resources (Sugar Land, Texas)--After an explosion and fire at Philadelphia Energy Solutions' (Philadelphia, Pennsylvania) South Philadelphia Refinery on June 14, Philadelphia mayor Jim Kenney earlier this week confirmed that the facility would be closing its doors permanently within a month. The 335,000-barrel-per-day (BBL/d) refinery is the largest on the east coast and, according to media reports, meets about 3% of the gasoline needs in the region, which lacks a strong refining footprint. The closure is expected to increase fuel imports to the region and increase the use of a key refined products pipeline running from the U.S. Gulf Coast to the Northeast region.

Northeast Refining
The South Philadelphia refinery is the biggest of five major refineries in the Northeast. Among other area refiners are PBF Energy Incorporated (NYSE:PBF) (Parsippany, New Jersey), which has two refineries in the region, with throughput capacities of 180,000 BBL/d and 190,000 BBL/d.

Industrial Info is tracking slightly more than $220 million in active refining projects in the Northeast.

Several smaller projects at the area's refineries are in the works. At a 70,000-BBL/d in Pennsylvania, United Refining Company (Warren, Pennsylvania) is underway with a gasoline hydrotreater upgrade. The project includes adding a new reactor to reduce sulfur content from 30 parts per million (ppm) to 10 ppm to meet Tier 3 gasoline regulations. The project is expected to be completed by the start of next year. For more information, see Industrial Info's project report.

Colonial Pipeline
The Colonial Pipeline is a refined products pipeline that originates in Houston, Texas, and terminates at the Port of New York and New Jersey. The pipeline was in the news a few years ago when a leak and subsequent explosion in Alabama caused a shutdown of the pipeline, leading to severe fuel shortages and price spikes in the Southeast. According to Bloomberg, the pipeline has been running at less than full capacity for much of the year, but now traders are paying more to reserve space on the line, which likely will be running at full capacity in the future. Industrial Info is tracking several smart pigging projects that are set to kick off on the pipeline early next year. Click here for a list of projects.

Fuel Imports
What the Northeast lacks in refining infrastructure, it makes up for in terminals. Industrial Info is tracking 230 terminals in Delaware, New Jersey, New York and Pennsylvania, which compose the Northeast market region. Click here for a list.

In addition to local refineries and the Colonial Pipeline, the region imports a great deal of fuel on tankers. The Jones Act of 1920, which stipulates that goods carried by water from U.S. ports to other U.S. ports be shipped on U.S.-flagged ships constructed in the U.S. and manned by U.S. citizens, hinders transport of fuel by ship from the refinery-heavy Gulf Coast region. Most of the region's fuel carried by ship comes from Asia and Europe.

Industrial Info is tracking a few expansion projects for petroleum products terminals in the area. Among these is Zenith Energy Holdings LLC's (Brooklyn, New York) expansion of its terminal in Brooklyn. At the existing 63,000-barrel terminal, Zenith plans to add a 40,000-barrel tank and three 10,000-barrel tanks. Construction is expected to kick off soon and be completed in the first half of 2020. For more information, see Industrial Info's project report. With the closure of the South Philadelphia Refinery, terminal expansions and grassroot terminal construction, particularly for import terminals, may become more prevalent in the region.

All of the ramifications of the closure remain to be seen, but an increase in fuel imports and fuller use of the Colonial Pipeline are expected. Analysts say that retail gasoline prices in the region will become increasingly dependent on import economics, and that extra demand for cargos could drive up freight rates, which would be passed along to consumers. Regional refiners could benefit from higher margins.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, eight offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.