Another US refinery bites the dust. 550 jobs to be axed.

[PeakARoo]

Article on the closing of the Valero Energy Corp refinery. Eliminating 550 jobs.

http://www.marketwatch.com/story/dismantling-the-us-refining-sector-2009-11-20

Here is another article on Valero with some comments from BP CEO Tony Hayward.

Mr Hayward claims "We will never sell more gasoline in the U.S. than we sold in 2007,"

http://www.marketwatch.com/story/valero-shutting-delaware-refinery-employing-550-2009-11-20

[Hope@ZeroKelvin]

I don't get it.

Yes, oil recovery is down, the ME is becoming even more unstable than usual yet demand from China is going way up and of course us Americans have not cold-turkeyied from our addiction to Happy Motoring.

Wouldn't you want to refine as fast as possible to get a huge stockpile to reap a big wad of wonga in the coming shortage?

Or is this a way to hasten the collapse?

http://online.wsj.com/article/BT-CO-20091120-712616.html

$882 million lost to the Delaware economy.....

And "Delaware City is the second plant to be idled on the East Coast. Last month, Sunoco Inc. (SUN) announced plans to indefinitely shutter its 145,000-barrel-a-day Eagle Point refinery in Westville, N.J. With these closures, "it looks like this is becoming a systemic problem in the independent refining sector," USW said."

[PeakARoo]

I don't get it either.

The situation is most perplexing...

[Seahorse]

Analysis from another forum from a poster I respect.

The answers are in here. The Delaware plant is evidently lumped into "northeast" along with one other plant, but we can deduce what happened.

The simple short answer is that with the current pricing in place, they were losing about $3 per barrel for everything they produced.

Their dominant crude oil source was medium/light sour crude....
Their product ratio, unleaded to distillates, was 1.18 to 1. Their company average is 1.7 to 1, so this plant was the most heavily weighted away from unleaded and toward distillates. Their west coast plants were much more heavily weighted toward unleaded.

So, they were doing the opposite of making a silk purse out of a sow's ear, whatever that metaphor is. They were taking the most expensive and nicest feedstock, and their product mix forced them to turn it into the least profitable fuel.

So that's why they died. There is another plant in that region, someone besides me feel free to look it up, and it is probably not quite as bad or they would have shut it down too.

Their west coast and midcontinent regions are profitable, and their gulf coast and obviously the northeast refiners are not. The gulf coast refiners use about 3/4 heavy sour, and 1/4 medium light, and the finished goods ratio is 1.46, and they are at just under breakeven.

so anything more heavily into distillates than that, and anything with more expensive feedstock is going to be a money loser.

Note that these values are for regions, and individual refineries within these regions could easily be better or worse depending on their specific plant economics, and also their rate of utilization.....

Well, the announcement said that they were shutting the plant, and laying off the workers, and taking the writeoff, but there are a number of reasons that they might just mothball it and preserve what they need to preserve, and let it sit empty.

The biggest one of these is that in a lot of the country, and I do not know for sure whether Delaware is one of these areas, the air pollution permits and attainment stuff is considered sort of like property of the company and has some value in case they want to start it back up at some point....If they totally close down and give up the permits, they are likely to be issued to the neighbors.....They are laying off 550 but the press release below says that the crew is 690 so you can imagine that a skeleton maintenance crew could be kept on hand for a long time to preserve the plant in monklike fashion for however long it takes to restart it.

Once these things shut down for an extended time period though, they never do come up in quite the same way, because the one thing these things hate more than repeated hot-cold cycles is being down for some number of years.

The press release above is also in disagreement with Valero's documents on crude oil source.....

[PeakARoo]

Analysis from another forum from a poster I respect.

The answers are in here. The Delaware plant is evidently lumped into "northeast" along with one other plant, but we can deduce what happened.

The simple short answer is that with the current pricing in place, they were losing about $3 per barrel for everything they produced.

Their dominant crude oil source was medium/light sour crude....
Their product ratio, unleaded to distillates, was 1.18 to 1. Their company average is 1.7 to 1, so this plant was the most heavily weighted away from unleaded and toward distillates. Their west coast plants were much more heavily weighted toward unleaded.

So, they were doing the opposite of making a silk purse out of a sow's ear, whatever that metaphor is. They were taking the most expensive and nicest feedstock, and their product mix forced them to turn it into the least profitable fuel.

So that's why they died. There is another plant in that region, someone besides me feel free to look it up, and it is probably not quite as bad or they would have shut it down too.

Their west coast and midcontinent regions are profitable, and their gulf coast and obviously the northeast refiners are not. The gulf coast refiners use about 3/4 heavy sour, and 1/4 medium light, and the finished goods ratio is 1.46, and they are at just under breakeven.

so anything more heavily into distillates than that, and anything with more expensive feedstock is going to be a money loser.

Note that these values are for regions, and individual refineries within these regions could easily be better or worse depending on their specific plant economics, and also their rate of utilization.....

Well, the announcement said that they were shutting the plant, and laying off the workers, and taking the writeoff, but there are a number of reasons that they might just mothball it and preserve what they need to preserve, and let it sit empty.

The biggest one of these is that in a lot of the country, and I do not know for sure whether Delaware is one of these areas, the air pollution permits and attainment stuff is considered sort of like property of the company and has some value in case they want to start it back up at some point....If they totally close down and give up the permits, they are likely to be issued to the neighbors.....They are laying off 550 but the press release below says that the crew is 690 so you can imagine that a skeleton maintenance crew could be kept on hand for a long time to preserve the plant in monklike fashion for however long it takes to restart it.

Once these things shut down for an extended time period though, they never do come up in quite the same way, because the one thing these things hate more than repeated hot-cold cycles is being down for some number of years.

The press release above is also in disagreement with Valero's documents on crude oil source.....

Thanks Seahorse, that sheds some light on the situation...

[Hope@ZeroKelvin]

That is the problem that California has always had.

Besides not having enough refining capacity for their state, their state regs require these difficult blends from the most expensive oil.

I think we in Texas refine almsot all the California gas, but I am not totally sure.