Fire causes Motiva refinery in Louisiana to evacuate, oil product prices rise

(Updates status of fire, no impact to refinery operations, updates diesel prices, adds additional details)

By Liz Hampton and Erwin Seba

HOUSTON, Aug 11 (Reuters) - A fire at Motiva Enterprises LLC's refinery in Louisiana on Thursday around midday forced workers to evacuate, local officials said, causing a key distillation unit to shut and boosting prices of oil products.

Motiva's 235,000 barrel-per-day Convent, Louisiana, plant was evacuated on Thursday after a fire broke out, according to St. James Parish Sheriff Willy Martin Jr. By Thursday afternoon, the fire was still burning, although it was now under control, he said.

Company officials, speaking at a press briefing, said they were investigating the cause of the fire and that it was being contained.

Two sources familiar with the refinery said the blaze started in the 45,000 bpd heavy oil hydrocracker unit, also known as the H-Oil Unit. All other units at the refinery are still running, according to company officials.

It (Other OTC: ITGL - news) is unclear what caused the fire or how long it would take to repair any damage. If the fire damaged the reactors, that could take months to fix, a third source said.

Motiva spokeswoman Angela Goodwin said refinery firefighters were battling the blaze with assistance from nearby community fire departments. She (Munich: SOQ.MU - news) later said that air monitoring confirms "there is no impact to the community."

A spokeswoman for the U.S (Other OTC: UBGXF - news) . Chemical Safety Board said the agency is following up on the incident.

Highways and roads near the refinery were shut for a time on Thursday, St. James Parish officials said, but have now reopened.

U.S. oil product futures prices rallied, with ultra-low sulphur diesel futures gaining 4.8 percent on the day. Gasoline futures rose 4.4 percent on the day. The diesel crack spread (1HOc1-CLc1), a measure of refiner margins, also rose, gaining more than 7 percent.

Mars Sour (WTC-WTM), the U.S. Gulf Coast medium sour benchmark delivered into Louisiana, fell by roughly 25 cents to 35 cents per barrel following news of the fire as traders weighed a potential cut to crude demand.

In addition to halting production of diesel from the refinery, the fire further disrupts an already delayed project by Motiva to combine the Convent refinery with the Motiva refinery in Norco, Louisiana, located 50 miles (80 km) away. That plan had been pushed back nine months for completion before the blaze.

The H-Oil Unit was scheduled to be revamped to diversify the feeds it could process by February 2017. That was to take place ahead of plans to idle the refinery's 92,000 bpd gasoline-producing fluidic catalytic cracking unit around June 2017, along with plans to build a pipeline between the two refineries.

Motiva is scheduled to divide its three refineries - which have a total daily refining capacity of more than 1 million barrels of crude - between co-owners Royal Dutch Shell Plc (Xetra: A0ET6Q - news) and Saudi Aramco as early as October.

Saudi Aramco will keep the nation's largest refinery, the 603,000 bpd plant in Port Arthur, Texas, while Shell (LSE: RDSB.L - news) would control this plant. How the fire will affect those talks was unknown on Thursday. A call to Shell was not immediately returned.

A hydrocracker distills heavier oil into distillates, such as diesel and gasoline. (Reporting by Jarrett Renshaw in New York and Liz Hampton and Erwin Seba in Houston; additional reporting by Jessica Resnick-Ault; Writing by Catherine Ngai; Editing by Chizu Nomiyama and Alan Crosby)