How flooding could hurt Louisiana refineries
NEW YORK (MarketWatch) -- Mississippi River flooding isn't expected to shut down Louisiana's petroleum complex, but the nine refineries that represent some 13.7% of U.S. capacity may face problems obtaining crude and shipping finished products, energy experts said Thursday.
Refiners, including a plant upstream in Mississippi, that collectively process some 2.4 million barrels a day expect to keep operating, but restrictions on river ship and barge traffic could limit their operations, the experts said.
Energy consultant Andy Lipow of Lipow Oil Associates said the National Weather Service currently forecasts the flooding to crest during the week of May 22 along the lower Mississippi.
"The first question about the flood is it a big, Katrina-like event -- that part is unlikely," Lipow said, referring to the giant 2005 hurricane that knocked out refineries along the Gulf of Mexico. "The biggest concern from a refinery facility standpoint is whether a levee is being breached."
Lipow said the flood may affect tanker traffic to and from refineries.
Tom Kloza, chief oil analyst for the Oil Price Information Service, said refiners are anticipating the flood may cut back on some operations because of logistical issues, but it's too early to say for sure.
"It's tough to run at full rates if you can't get some of the crude and feedstocks that get delivered by water and processed into gasoline and diesel, and it's tough to send barges to Florida, or southeastern ports of call if there are shipping restrictions on the river," Kloza wrote in an email.
A total of about 2 million barrels a day of refining capacity could be at risk of some impact from the flood, Kloza wrote.
The largest refinery in the region is Exxon Mobil Corp.'s Baton Rouge refinery, which has a capacity of about 505,000 barrels a day. It's also the second-largest U.S. refinery. Exxon spokesman Kevin Allexson said refineries in Baton Rouge and a 193,000-barrel-a-day facility in Chalmette, La., continue to operate.
Bill Day, a spokesman for Valero Energy Corp. , which operates nearly 400,000 barrels a day of refining capacity at its facilities in Memphis, Tenn., and St. Charles, La., said operations haven't been affected. "We're still operating and still closely monitoring the river, and don't expect disruptions to our operations," Day said. "We'll probably know more about some of the logistics issues early next week."
Royal Dutch Shell Plc said earlier this week it's preparing for rising waters, which could impact loading and shipping at two of its Louisiana facilities.
The second-largest refinery in the region is Marathon Oil Corp's Garyville, La., plant, which has a daily capacity of 436,000 barrels.
ConocoPhillips operates a 247,000-bpd refinery at Belle Chasse, La.
Barry Jeffery, a spokesman for Murphy Oil, said operations at its 120,000 barrel-a-day Meraux, La., refinery remain normal.
"We continue to monitor the river levels very closely," he said. "We do not anticipate any impact on our operations."
Louisiana Gov. Bobby Jindal has said that the Alon USA Energy Inc. refinery in Krotz Springs, which has a capacity of 80,000 barrels a day, could be shut down if the Morganza flood gate is opened, as early as Saturday, according to reports.
Alon spokesman Blake Lewis said Krotz Springs Refinery operating normally, employees are monitoring conditions and adjust operations as needed.
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