kgaiflyer From United States of America, joined Jul 2008, 4114 posts, RR: 1
Reply 1, posted (1 year 2 weeks 4 days 6 hours ago) and read 4927 times:
If this is the Hess refinery that's visible from the NJ Turnpike, it is fairly elderly. I imagine keeping it maintained and running efficiently would be fairly expensive. I don't see how refining "Jet A" and selling nothing else would lead to anything but losses.
STT757 From United States of America, joined Mar 2000, 16647 posts, RR: 52
Reply 2, posted (1 year 2 weeks 4 days 6 hours ago) and read 4906 times:
UA management had stated they were going to see how it worked out for DL, there's plenty of available refineries in the Northeast becoming idle. Here's an article about Buckeye pipeline purchasing the Chevron facility in Perth Amboy, the article talks about DL's recent refinery deal and that Buckeye was also going to refine Bakken shale oil from Montana, North Dakota and Canada at the Perth Amboy facility.
Quote: Buckeye’s plan is driven by changing dynamics in crude oil markets—while supplies are tight on the East Coast, a glut of oil exists in the western United States thanks in part to increased production of "Bakken’’ shale oil from Montana, the Dakotas and Canada. That makes it profitable for Buckeye to transport crude Bakken shale oil by train, and other oil supplies by boat from a hub in the Bahamas.
"We expect to spend approximately $200 million to $225 million of growth capital at Perth Amboy over the next three years to modernize the facility, transform it into a highly efficient multiproduct storage, blending and throughput facility," said Clark Smith, Buckeye’s CEO, on a recent earnings call
Now this is the interesting part of the article:
Quote: High crude prices in the Northeast had prompted recent refinery sales including that of Philadelphia-area facility Trainer bought by Delta Airlines. Some analysts said unless it imported cheaper oil by train or boat, Delta would be hard pressed to make money.
But now Buckeye is exploring the option of importing Bakken crude by train at the behest of several unidentified customers.
The company’s management is keeping an eye on the jet fuel market as it also considers expanding pipelines to John F. Kennedy International Airport in the future, according to an investor presentation this spring.
After reading that excerpt it almost seems like they're hinting that one of their unidentified customers is an airline.
Tan Flyr From United States of America, joined Aug 2000, 1897 posts, RR: 0
Reply 8, posted (1 year 2 weeks 4 days 3 hours ago) and read 4408 times:
This whole NE refining business is about as clear as crude oil..but there are some fundamentals that have to be recognized. These include:
The shutdown of the HOVENSA refinery in St. Croix was prompted by the EPA not giving a waiver on the fuel used to process (distill and crack) crude oils. They would have to IMPORT Natural Gas (LNG) to fuel teh refinery. Way too costly..result ..shut 'er down.
The export from Rotterdam (and a bit from the UK) of excess gasoline supplies since their consumers have shifted to more Diesels. Shell exports quite a bit to Montreal & NY, others to NYC, Boston & Philly. Add the fact that Irving Oil in Canada has a very modern and efficient refinery that exports over 150,000 barrells a day of finished fuels to varioys facilites in Maine, Boston and NYC at very competive pricing.
Most of the current refineries in PA/ NJ/ DE were set up to refine light to Medium African crudes , then Brent type crude from the North Sea and a bit of Arabian light...all easy to refine, but more costly raw materials.
PBF noted in December they are having built thousands of new Rail Tanker cars to bring unit trains of Bakken Light or Alberta Crudes to its' refinery in Delaware.. Taking advantage of tremendous cost differences. They seem to think it will take years for regualtors to approve any new pipelines from teh midwest to SE PA/ NJ/ Delaware area.(and probabaly not during the current administration)
and maybe the most intersting of all, actuall overall Gasoline consumption is down in the US..in many areas back to 2002 levels...hardly an incentive to re-hab older facilites and deal with current Government red-tape.
The upgraded and expanded Shell refinery in Port Arthur Texas, and the Marathon in Garyville, LA have added over 500,000 barrels of new capacity in the last few years (projects started over 10 years ago.) The problem with moving this refined product via barge (vs existing pipeline capacity from there to the mid-atlantic area) is antiquated US MAritime laws that state it must be hauled on US flagged tankers...there are very few if any of those available. Foreign flagged vessels could do it at very attractive rates.
So, long and short, you have to give DL the opportunity to see results thru several years and changing economic conditions before making any verdict. IF UA were to decide sometime to get into teh business, the logical parter is VAlero with its Bayonne, NJ ( one of the original Standard Oil refineries from 1909)
srbmod From , joined Dec 1969, posts, RR:
Reply 10, posted (1 year 2 weeks 4 days ago) and read 4099 times:
Quoting WDBRR (Reply 6):
Wouldn't fuel prices go up with less
refining facilities to keep up with demand?
Thought the airlines would want to keep
their fuel costs down.
Yes, and that's a reason being cited for the most recent jump in gas prices in the last week.
Delta's purchase of a refinery is something that is the gas prices continue to rise (Fuel prices right now are at levels more akin to the summertime than February.) may be something that was a smart idea. Could UA or another airline look into buying their own refinery? Of course they could, but as UA has stated, they want to see how it pans out for DL.
TWA772LR From United States of America, joined Nov 2011, 1016 posts, RR: 1
Reply 14, posted (1 year 2 weeks 3 days 19 hours ago) and read 3419 times:
Sounds like a stupid question but, why wouldn't UA buy a refinery in Houston? You know, the oil capital of the western hemisphere and location of their largest hub? I'm sure there are a few unused refineries in the area... Also with the taxes previous posters have stated, wouldn't the Texas taxes on oil and gas be lower?
USA, Canada, UK, Belize, France, Australia, Germany
solarflyer22 From US Minor Outlying Islands, joined Nov 2009, 732 posts, RR: 0
Reply 15, posted (1 year 2 weeks 3 days 19 hours ago) and read 3363 times:
Quoting TWA772LR (Reply 14): Sounds like a stupid question but, why wouldn't UA buy a refinery in Houston? You know, the oil capital of the western hemisphere and location of their largest hub? I'm sure there are a few unused refineries in the area... Also with the taxes previous posters have stated, wouldn't the Texas taxes on oil and gas be lower?
This is a complicated issue though I was in favor of what Delta did. In Houston, there are very few "Small" refineries for sale that would be suitable. You need a relatively small one for Jet A otherwise, you are kind of stuck being both a refiner and a airline. Ideally you want to only produce slightly more than what the airline consumes.
I think there is also a wall street penalty for public airlines for this. They don't like the combined entity. Its hard for them to value and its like mixing two totally different stocks together. Sounds mundane buts its quite true.
jayunited From United States of America, joined Jan 2013, 731 posts, RR: 1
Reply 16, posted (1 year 2 weeks 3 days 18 hours ago) and read 3081 times:
I think the jury is still out on this issue DL still needs to be given more time to properly see if their refinery is actually paying off which will probably take another year before the airline industry is able to get a really clear picture. United told employees and investors that they would take a wait and see approach to this business of owning a refinery. So even if there is some interest United will not make a move until they can be absolutely sure that owning a refinery can indeed offset some of the airlines fuel cost.
brilondon From Canada, joined Aug 2005, 4004 posts, RR: 1
Reply 17, posted (1 year 2 weeks 3 days 15 hours ago) and read 2199 times:
Quoting kgaiflyer (Reply 1): If this is the Hess refinery that's visible from the NJ Turnpike, it is fairly elderly. I imagine keeping it maintained and running efficiently would be fairly expensive. I don't see how refining "Jet A" and selling nothing else would lead to anything but losses.
They are not going to make money on their refineries, they are not in the fuel business. They are probably thinking that if they could secure their supply of fuel; they would not be at the mercy of the oil companies as much. It allows for a degee of certainty in their fuel expenses that they can control. That is the reason UA is looking at this purchase.
UALWN From Andorra, joined Jun 2009, 2620 posts, RR: 2
Reply 18, posted (1 year 2 weeks 3 days 12 hours ago) and read 1803 times:
Quoting solarflyer22 (Reply 15): You need a relatively small one for Jet A otherwise, you are kind of stuck being both a refiner and a airline.
It has been said in a recent thread devoted to DL's refinery that right now only 20% of its production is Jet A. The rest, DL has to sell it (or barter it for Jet A) in the open market. DL wants to bring that 20% up to 33%, but some experts think that might be hard. So, yes, DL is now both an airline and a refiner.