Texas Refiners Spared by Harvey Sweat Storm's Second Round

(Bloomberg) -- Just as refiners in South Texas are starting to recover from Harvey, forecasters have the storm gearing up for a second landfall in an area further east that includes the nation's largest refinery.

As the storm moves toward the Texas-Louisiana border from its present location over the Gulf of Mexico, Motiva Enterprises LLC's Port Arthur facility, the largest in the U.S., remains open but is running at 60 percent capacity with supply issues, spokeswoman Angela Goodwin said in email. Valero Corp.'s Port Arthur operation has already closed two units because of flooding, Total SA's plant there is said to cut its output to a minimum and Exxon Mobil Corp.'s nearby Beaumont refinery is said to be shutting down because of flooding.

The area near the Louisiana line has 1.65 million barrels a day of refining capacity, according to Andy Lipow, president of Lipow Oil Associates LLC. 

Harvey initially reached the coast near Rockport, Texas, on Friday, and was quickly downgraded to a tropical storm from a Category 4 hurricane. Since then, a shift back over the Gulf's warm waters has re-energized it. The new landfall, forecast for Wednesday, could bring two more feet of rain, forecasters say.

While flooding is the primary problem for refineries in Harvey's aftermath, it's not the only one. Marathon Petroleum Corp.'s Galveston Bay refinery, for instance, is said to be shutting because pipeline disruptions have led to the plant running out of crude.

Meanwhile, as the storm churns further to the east, some plants near where Harvey had its initial landfall may be up and running again soon.

Valero and Citgo Petroleum Corp. were said to be preparing to restart their refineries in Corpus Christi after Harvey moved through over the weekend, according to people familiar who asked not to be identified because the plans aren't public. Valero's Three Rivers refinery may restart as soon as later this week.

Even as plants recover, the restarts will be delayed by distribution issues and crude supply, Sandy Fielden, director of oil and products research at Morningstar Commodities Research, wrote in a note. Additionally, concerns are compounded by port closures, he said, that "cuts off the supply of imports."

The Port of Houston has no timeline for reopening, while Corpus Christi's port is expected to resume normal operations by Sept. 4.

Colonial Pipeline, the main conduit for gasoline and diesel from the Gulf Coast to the eastern U.S., is already not receiving supply from the Houston area. The loss of refineries around Port Arthur, Texas, would leave only Louisiana refineries supplying fuel to New York and other demand centers.

The region from Houston to Sabine Pass, home to refineries, chemical plants and energy ports, will get anywhere from six to 12 (15 to 30 centimeters) of additional rain through Friday, according to the National Hurricane Center in Miami. As much as 10 inches could fall in southeastern Louisiana, including New Orleans, which is dotted with grain silos, refineries and port facilities. Heavy rains is also forecast for Arkansas, Mississippi and Alabama.

--With assistance from Meenal Vamburkar

To contact the reporters on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net, David Marino in New York at dmarino4@bloomberg.net.

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, David Marino at dmarino4@bloomberg.net.