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As Gulf Coast refiners restart their plants after Hurricane Harvey, they must step through a complex process that can take days to weeks to complete, even if they were largely unscathed by the storm's flooding rains.

All of them need the support of others -- third-party suppliers, many of whom have been hit equally as badly by Harvey's rage. Refiners require adequate supplies of crude oil as a feedstock, nitrogen to dry internal equipment, steam to heat things up and hydrogen to lower sulfur content in their fuel. They also depend on working pipelines, rail cars and terminals to transport their finished products to buyers.

"Unless all those parts of the petroleum supply chain are operating, it's challenging for refineries to restart," said Susan Grissom, an analyst at American Fuel & Petrochemical Manufacturers, a refining industry group.

On Friday, two weeks after Hurricane Harvey made landfall in Texas, six refineries remained shut, the U.S. Department of Energy reported. At least 1.4 million barrels a day could be offline past mid-September, Goldman Sachs analysts said in a report Tuesday.

In a conference call Friday sponsored by the American Petroleum Institute, Robert McNally, founder and president of the Washington-based Rapidan Group, a leading energy consulting firm, called oil the lifeblood of modern civilization.

"What strikes me is how quickly the Gulf capacity came back," said McNally, who was an energy adviser to President George W. Bush. "At the max, with Harvey we lost 25 percent of U.S. refining capacity under water, no electricity and employees scattered. Now roughly about 8 percent is out and in the process of restarting."

The market was effective in managing oil prices as a result of Hurricane Harvey, McNally said.

"Wholesale gasoline futures prices -- not retail prices at the pump -- before Harvey were about $1.68 a gallon," McNally said. "At the peak, they surged up to $2.15, up 28 percent. [Friday morning] they were down to about $1.66 a gallon, below where they were [before Harvey]."

Prices shot up because of the uncertainty created by Harvey, McNally said.

"Having a freely traded, open market benefits us in crises," McNally said. "It makes us more resilient."

Many refineries that have reopened have found their schedules slowed as they await important supplies and support. Citgo Petroleum Corp.'s Corpus Christi refinery, which shut ahead of Harvey on Aug. 24, had planned to begin restarting on Aug. 31. A lack of services and restoration of power have delayed the restart, according to a person familiar with the plant's operations.

Citgo relies on suppliers for hydrogen, nitrogen and steam, and they need to remove the mixture of methane, ethane, ethylene, propane, propylene, and butane that's created by the refinery process and sold to petrochemical plants.

The inability of Calpine Corp. to deliver enough steam to the refinery slowed the startup by several days, the person said. On Wednesday, six days later than originally planned, Citgo finally returned to normal operation.

Several pipelines that were shut have now resumed operations, including TransCanada Corp.'s Marketlink pipe that carries crude from Oklahoma to Texas and Explorer Pipeline Inc.'s lines that take refined fuels to Tulsa and Chicago. Having that infrastructure working is a significant first step in getting refineries going again.

The next step: People power. In some cases, staff members are displaced from their homes and it can take them awhile to get back to the job. In others, their access to work has been limited by washed out or flooded roadways.

Once the staffing's in place, the real work can begin. All equipment and instrumentation will be inspected and tested, focusing particularly on potential water damage, which sometimes can be tough to assess.

"If there was damage, it would be related to flooding, as compared to past events like Hurricanes Rita or Ike, which were very much wind-related," said Jim McCloskey, vice president of refining and petrochemicals for the fuel manufacturer's group. "We didn't have near the power outages experienced in those storms."

After inspections are completed, operators must dry internal equipment with nitrogen, a necessary step even without flooding because of natural condensation.

At that point, processing units are reheated: Distillation columns, which separate oil, gas and other materials, start their work at 212 degrees Fahrenheit, the temperature necessary to boil off water. Coker units, used to convert heavy fuel oil into naphtha, petroleum coke and other products, may require temperatures higher than 600 degrees while some furnaces may need to get as high as 900 degrees.

Once those temperatures are reached, various units within the plant can finally be brought online, said Eric Smith, associate director at the Tulane Energy Institute. The process can take several days to complete, and two to three weeks to get back to full operations, Smith said in a telephone interview. And it doesn't always go smoothly.

Often enough, restarts will reveal minor damage missed in the inspections, he said, including leaks. "In the process, maybe some part fails completely," he said.

Information for this article was contributed by Meenal Vamburkar, Alex Nussbaum and Barbara Powell of Bloomberg News; and by David Smith of the Arkansas Democrat-Gazette.

Business on 09/09/2017

Print Headline: Texas refiners rely on support to restart

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