UPDATE 4-Biggest U.S. Oil Refinery Stumbles after Fire

Monday, 19 August 2013 03:11 PM

(Updates with information from sources, background, details) By Erwin Seba PORT ARTHUR, Texas, Aug 19 (Reuters) - A fire at the largest oil refinery in the United States has knocked out more than half of its output for at least two weeks, the latest in a string of mishaps following a $10-billion expansion at the Motiva plant in Port Arthur, Texas. Royal Dutch Shell Plc - which owns the refinery with Saudi Aramco - said production was crimped after the fire on Saturday, the second in a week, caused reductions and shutdowns at the 600,000 barrel-per-day (bpd) plant. Despite the outage, the U.S. Gulf Coast refined oil markets had a muted reaction. U.S. Gulf Coast gasoline and ultra-low sulfur diesel prices relative to the New York Mercantile Exchange barely rose on Monday because the region is well supplied. Sources familiar with work at the plant said on Monday the fire broke out in a hydrocracker unit next to the largest of the refinery's three crude distillation units, known as VPS-5. The 325,000 bpd VPS-5 unit will be out of production for at least two weeks. It was placed on warm circulation on Sunday because of the hydrocracker shutdown. The VPS-5's vacuum section produces a large volume of vacuum gasoil, which the neighboring hydrocracker refines into motor fuel. A refining unit on warm circulation is kept at high operating temperatures continues to have oil circulating through it, but does not produce. The 110,000 bpd naphtha hydrotreater was also shut briefly but was restarted Sunday night, said energy industry intelligence service Genscape. The sources said the 75,000 bpd hydrocracker, which boosts output of motor fuel by refining feedstocks under high pressure with hydrogen, was shut by fire which damaged communication lines and instrumentation needed to run the unit. The hydrocracker's production sections were not damaged by the fire. "Several units that are integrated to this will run at reduced rates and others are being shut down," while repairs are underway, Shell spokeswoman Kimberly Windon said. Windon added there were no related injuries at the plant, which has about 3.4 percent of U.S. refining capacity. The sources said refinery managers spoke of their frustration on Monday with the problems that have plagued the expanded refinery since it began operating in late April 2012. "It was a bad weekend for us," said one source. "We're all feeling snake-bit. It just seems like we get up and going and then something else goes wrong." SERIES OF SETBACKS The weekend fire was the latest in a series of setbacks at the refinery, where the VPS-5 crude distillation unit (CDU) is expected to run up to 75,000 bpd below capacity for more than a year due to a piping issue. The CDU has been beset by vibration problems when Motiva attempted to run it at or near its full capacity, Reuters exclusively reported on Friday. The company may shut the crude unit in fall 2014 to fix the persistant vibration problems, sources told Reuters on Friday. The unit has been running at reduced rates ranging between 250,000 bpd and 285,000 bpd since it restarted production early this year. The CDU was damaged about a month after initial start-up following five years of construction by a chemical leak in June 2012 that caused seven and a half months of work and delays. A week ago, a blaze shut the sulfur recovery unit and led to a reduction in refinery production at the plant. The sulfur unit is slated to be down for two to three weeks. In that incident, a hole 5-feet long (1.5 meters) and 1-foot wide (30.5 centimeters) was melted in the side of the unit that removes sulfur from hydrogen sulfide gas produced in the refining of crude oil into motor fuels. "It is not unusual for a sulfur unit to have problems, especially at the biggest refinery in the United States. It is a bad place to have an issue because once it's shut down you'll have to shut other units like hydrotreaters that feed into it," said John Auers, refinery specialist with Turner, Mason & Company in Dallas. (Additional reporting by Selam Gebrekidan in new York and Kristen Hays in Houston; Editing by Terry Wade and Andrew Hay)

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Monday, 19 August 2013 03:11 PM
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