Wednesday, March 28, 2012

Sunoco’s Philadelphia Refinery to close 07/01/2012: 335,000 More Barrels Going Offline

“U.S. gasoline prices jumped 6% in February, and market experts predict they will climb higher because critical refining operations in the Northeast are shutting down.

From New York to Philadelphia, refineries that turn oil into gasoline have been idled or shut permanently because their owners are losing money on them. Sunoco Inc. is expected to close the region's largest refinery in July, taking another 335,000 barrels per day in production capacity off the market.

The East Coast refineries are getting squeezed by the soaring cost of crude oil, the major component in gasoline. The cost of oil has jumped in the past year due to global economic growth and rising tensions between Western nations and
Iran, a major producer. Refineries haven't been able to increase their own prices enough to compensate.”

“Refineries in the Northeast are under financial pressure for two reasons. They have limited access to cheaper, high-grade crude oil produced in the middle of the U.S. because there are not enough pipelines, which is forcing them to pay more for oil from elsewhere, most of it from overseas.

And many of their facilities aren't set up to process lower-grade crude that is cheaper.

As Northeastern refining capacity declines, it will force distributors in the region to buy gasoline from elsewhere, pushing up prices across the country and increasing the likelihood of price spikes, government officials and analysts warn.

"There's now going to be a question if we can get enough gasoline into the East Coast for summer," said David Greely, an energy analyst at Goldman Sachs Group Inc. The U.S. Energy Department has warned a shortfall could develop as early as July.” (1) (2)

“Originally published Sept. 7, 2011:

Sunoco Inc., an iconic Philadelphia company and a manufacturing mainstay along the Delaware River for more than a century, is getting out of the refining business.

Sunoco said Tuesday that if it cannot find a buyer for its oil refineries in Marcus Hook and on the Schuylkill in South Philadelphia it will close the plants in July.

About 1,500 of Sunoco's 10,000 employees work in refining, according to the company.”

“Elsenhans said the refineries had lost money for eight of the last 10 quarters - $772 million since 2009. Sunoco can no longer justify the investment required to maintain the plants, much less to improve their competitiveness in a world where refining profits are increasingly elusive, a spokesman said.”

“Sunoco opened the Marcus Hook refinery in 1902 to refine crude oil brought up by ship from Texas. In South Philadelphia, it acquired the Atlantic Petroleum Corp. refinery in 1988 and Chevron Corp. refinery in 1994 and merged the two Schuylkill plants into one of the nation's largest refineries.

Together the Marcus Hook and Philadelphia refineries can process more than 500,000 barrels of crude a day, making them one of the largest refining centers in the country.

The U.S. refining industry has suffered in recent years from reduced demand caused by the economic downturn, improved fuel mileage of vehicles, and the introduction of ethanol into motor fuels.

Domestic refiners say they are also at a competitive disadvantage with imported fuels from overseas refiners who face less rigid environmental controls.

Sunoco's refineries in Southeastern Pennsylvania have the added disadvantage of relying on more expensive low-sulfur crude as their raw material, which has depressed their profitability relative to other refineries.” (3)

“A New York billionaire appears to be interested in buying the Sunoco refinery in Philadelphia.

John Catsimatidis, who formed United Refining Energy, said that in an interview with Bloomberg News.

The refinery is set to close on July 1st if a buyer isn't found.

Catsimatidis told Bloomberg News that he will decide this month if he will make an offer on the plant.

One analyst said the refinery may be a bargain at $400 million since Sunoco was planning on shutting down the refinery.

Sunoco, which owns three plants on the U.S. East Coast and announced plans to exit refining in September, lost $1.68 billion in 2011 as the profit margin for turning oil into fuel shrunk to the lowest point since 2009, according to data compiled by Bloomberg. The Philadelphia plant is Sunoco's only operating refinery.

United Refining operates a 70,000 barrel-a-day refinery in Pennsylvania.” (4)


(1) As gas prices rise, no relief in sight at pump FoxNews, 03/17/2012

(2) As gas prices rise, no relief in sight at pump, The Wall Street Journal, 03/17-03/18/2012

(3) Sunoco to sell or close its refineries in Philadelphia, Marcus Hook. 12/02/2011

(4) Billionaire mulling bid for Phila. Sunoco refinery,, 03/02/2012


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