About 30% of Gulf Coast Refining Capacity Going Offline
(Bloomberg) -- Oil and chemical facilities located along the Texas and Louisiana coasts are racing to shutter plants as Hurricane Laura settles on a course to rip through the nation’s energy corridor this week.
Some of the largest U.S. refineries are winding down in advance of Laura, which could become a major hurricane before landfall, shutting in nearly 2.9 million barrels a day of capacity. That’s about 30% of the 9.3 million barrels a day of U.S. Gulf Coast refining capacity, according to Lipow Oil Associates. About 82% of oil production and 57% of natural gas production has been taken offline.
Gasoline prices surged on the disruptions on concern that Laura could approach a level of destruction not seen since Hurricane Harvey in 2017. Gasoline futures jumped for a second day in a row, rallying by as much as 5.3% after notching the biggest one-day climb since May on Monday. Prices were also trading at the highest since before the Covid-19 pandemic sent demand and prices spiralling in early March.
“From a refining standpoint, it’s not as bad as what happened during Harvey,” said Andy Lipow, president at consultancy Lipow Oil Associates, though that could change depending on the strength of the storm. However, this time any supply disruptions would be occurring in a vastly different market because of the pandemic. “Refiners are operating at about 80% utilization,” he said. “That means refiners who aren’t impacted by the storm can pick up” any slack in supply.
He added that gasoline inventories are also slightly higher versus a year ago, with diesel stocks much higher.
Motiva Enterprises LLC is shutting both its 607,000 barrel-a-day oil refinery and chemical plant in Port Arthur, Texas, according to people familiar with the matter and a regulatory filing. Valero Energy Corp. is also shutting its 335,000 barrel-a-day Port Arthur facility. Oil major Total SE said it was starting an orderly shutdown of its 225,500 barrel-a-day refinery there. The city of Port Arthur and Jefferson County have issued a mandatory evacuation for some residents.
A Motiva official could not be reached for comment. A Valero spokeswoman said the company is monitoring the storms and assessing protocols but did not specifically comment on the shutdown.
Meanwhile, Exxon Mobil Corp. has started shutting down both its 560,500 barrel-a-day Baytown refinery and 369,000 barrel-a-day Beaumont refinery. Phillips 66 is shutting its 260,000 barrel-a-day Lake Charles refinery. Delek US Holdings’s 80,000 barrel-a-day Krotz Springs refinery had been shut due to a boiler issue and would remain down because of the hurricane, according to a person familiar. Citgo Petroleum Corp is also shutting its 418,000 barrel-a-day Lake Charles refinery, according to sources.
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