Gulf Coast Refiners and Chemical Processors Shut Down as Tropical Storm Isaac Veers Westward

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Oil refineries and chemical processing facilities went into temporary shutdown mode Monday as Tropical Storm Isaac gathered strength and veered westward towards the Alabama, Mississippi and Louisiana coasts.

"We have been able to confirm that Tropical Storm Isaac forced the closure of about 1.5 million barrels per day of Petroleum Refining capacity in the New Orleans, Mississippi and Alabama area as of Monday evening," said Dave Elpers, a product developer for Industrial Info Resources Energy (IIR Energy) (Sugar Land, Texas), the supply-side intelligence unit of Industrial Info. "The situation is very fluid. The closures that have been announced represent more than half the crude distillation unit capacity of that sub-region, and about 20% of the crude distillation unit capacity in the PADD 3 region."

Elpers also stated that seven years after Hurricane Katrina devastated New Orleans, refiners and chemical processors were being particularly mindful about safety as Isaac gained strength. "In the event Isaac becomes a hurricane, as forecast, it could be very damaging to the refining assets and personnel at the facilities. However, if the assets are evacuated as a precaution, and the storm passes through without causing physical damage or flooding, there is still tremendous risk involved in refinery operations. Bringing down refining units and then subsequently starting them back up is, in addition to hurricanes, some of the most dangerous aspects of the refining business," Elpers said.

Trey Hamblet, Industrial Info's vice president of research for the Chemical Processing Industry, said two of the region's five ethylene plants were closing, and the other three were keeping a wary eye on the storm's path and progress.

Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Transmission and Terminals industries, said that as of Monday evening, the pipeline connected to the Saint James Capline Terminal had closed. The terminal itself was listed as "operational," though reportedly no product was moving in or out of the terminal. Most gas-processing plants along the Gulf Coast were said to be in a "wait and see" mode, he added.

Isaac, which was gaining strength on Monday, could be upgraded to a Category 2 hurricane on Tuesday. It is expected to hit land Tuesday night or Wednesday morning with top sustained winds of around 100 miles per hour, creating a storm surge of up to 12 feet in some places. As of Monday night, Isaac was still a tropical storm, with top sustained winds of about 70 miles per hour. At that time, the storm was located about 200 miles southeast of the mouth of the Mississippi River and was moving in a slow northwestern pattern.

In a blast email to clients Monday afternoon, IIR Energy said it was tracking the impact of Tropical Storm Isaac on all refineries along the Gulf Coast. The situation was very dynamic, but a number of Gulf Coast refineries had temporarily shut down, including:

• Phillips 66's 250,000 barrels per day (BBL/d) plant in Alliance, Louisiana,
• Exxon Chalmette's 200,000 BBL/d refinery in the New Orleans area,
• Valero's St. Charles refinery, a 190,000 BBL/d facility in the New Orleans area,
• Placid Point Allen, a 55,000 BBL/d refinery in the New Orleans area, and
• Valero's Meraux refinery, a 125,000 BBL/d facility, also located in the New Orleans area. This refinery was already offline for a turnaround when the decision was made to shutter it for the storm.

Several refineries that had reduced operations to a minimum rate, assumed to be no more than 50% of capacity, including:

• Motiva's Convent 230,000 BBL/d refinery in the New Orleans area
• Motiva's Norco refinery, another 230,000 BBL/d refinery, also located in the New Orleans area

Several refineries were said to be closely watching the storm and had deferred, for the moment, making shutdown decisions. These facilities included:

• Chevron's 325,000 BBL/d refinery in Pascagoula, Alabama
• Shell's 80,000 BBL/d refinery in Mobile, Alabama
• Marathon's 450,000 BBL/d facility in Garyville, Louisiana

Energy traders have been tracking Tropical Storm Isaac's progress since August 15, 2012 on Thomson Reuters' Global Tropical Weather Forum, a complimentary service, according to Stephen Mitchell, global head of weather for Thomson Reuters.

"There are 30 to 40 trading events during each hurricane season," Mitchell said in an interview Monday afternoon. "Most weather-related energy trades are driven by release of key government weather forecasts. A minority take place after an existing tropical system strengthens or weakens."

"But in a small minority of energy trades that are tied to key energy production areas, the decision to shut down or restart energy facilities... [can be difficult] ," Mitchell continued. "That's where our weather forum and IIR Energy's outage database really combine to deliver value to energy traders and arbitragers. People use this service and IIR's outage database to make bets on where energy prices are going because of weather."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, 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.