Cold weather, not profit margins, was culprit in refinery glitches

By Jessica Resnick-Ault

NEW YORK, Jan 13 (Reuters) - An unusual spate of refinery glitches at the weekend from Philadelphia to Illinois was more likely caused by extreme cold conditions than the breakneck pace at which the plants have been running, according to engineers and consultants.

The disruptions, which included three fires on Saturday and one shut-down late last week, affected about one-fifth of the refining capacity in the eastern half of the United States. The refineries are in restart, with most of the capacity expected back on-line by the end of the week.

"Cold just kind of seeps its way in, and freezes something up and all the sudden it stops working," said Neil Earnest, a consultant at Muse Stancil, whose practice includes asset performance. Refineries that run heavier crude oil, such as Canadian crude, may be more susceptible to problems with freezes, all else being equal, Earnest said.

Cold weather usually pays havoc with the water and steam systems, said an engineer who spoke on condition of anonymity because of company policy. If crude is not kept hot, particularly heavy grades, it will get stuck in pipes, he explained.

Even so, the remarkably coincidental timing of the glitches and fires will raise questions about the stability of refiners that have been running at exceptionally high rates to capitalize on the strongest profit margins in years.

In July, for instance, refiners ran at 94.6 percent of their capacity, the highest such rate in a decade, according to data from the U.S. Energy Information Administration. Last week they were running at 93.9 percent, the second-highest rate for the first week of January of the past 15 years.

While refineries are complex, high-pressure facilities that often suffer incidental glitches with minimal impact, the rash of incidents over the past few days was unprecedented in recent years outside of storm-related disruptions such as Superstorm Sandy in 2012 or Gulf Coast hurricanes.

BP's 413,500 bpd Whiting, Indiana, refinery had problems that were attributed to cold weather, as freezing temperatures delayed restart of a crude unit and the plant's largest crude unit cut back production. Philadelphia Energy Solutions had a utility failure that resulted in small fires at its 330,000 bpd Philadelphia refinery.

Marathon also reported a fire at its 212,000 bpd Robinson (LSE: RBN.L - news) , Illinois refinery, shutting a crude and vacuum unit. Husky Energy reported a fire in the isocracker at its 144,000 bpd Lima, Ohio, refinery, which damaged the unit badly and forced all others to halt output.

Before the weekend, the National Weather Service warned of an Arctic air blast from Canada providing subzero temperatures for the U.S. Midwest, Southeast, Mid-Atlantic and Northeast.

Refiners, particularly those with access to discounted domestic crude, saw robust profit margins on the back of the shale boom, and raised their output.

But these higher-than-normal utilization rates are unlikely to have triggered the outages, said Earnest.

"In many instances, it's better to run the refinery at high utilization rates, because it prevents fouling on the exchanges and furnaces," said Andy Lipow, of Lipow Oil Associates in Houston.

Utility systems, like the one that failed at the Philadelphia Energy Solutions refinery in Philadelphia, should hold up despite higher run rates, said Mark Rout of KBC Advanced Technologies.

"Those utility systems should be more of a service to a plant and unaffected by run rates," Rout said.

KBC's view is that best-in-class utilization is approximately 96 percent, accounting for occasional maintenance turnarounds.

Beyond the run rates and weather, refineries are subject to other factors, like procedural changes when equipment is starting or going out of service, said Michael Wojciechowski, a Houston-based refining analyst at WoodMac. (Reporting By Jessica Resnick-Ault; Editing by Grant McCool)