FlyASAGuy2005
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Delta Makes Bid For Oil Refinery?

Tue Apr 03, 2012 9:38 pm

I came across this today

http://www.delcotimes.com/articles/2...news/doc4f7b0c749d5f8261554868.txt

I know Delta has been "diversifying" their business as of late. Scooping up some charter company to expand Delta Private Jet. The GOL deal. The MRO company their going into with Aero Mexico, etc. etc. but an oil refinery?

Thoughts? Their angle?
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litz
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Delta Makes Bid For Oil Refinery?

Tue Apr 03, 2012 9:46 pm

The angle seems quite clear ... presuming this isn't a case of someone being 2 days late for the 1st of the month ...

An airline that makes its own jet fuel is beholden solely to the price of a barrel of oil for the source material for the refinery ... and if they can undercut the market price for the end-product (jet fuel) with that refinery, they can reap savings over the competition on their fuel needs ... with a side bonus of being able to sell off the undesired byproducts for additional profit.

I have no clue if there's any way to do so profitably ... or what this thing's production output would be compared to their needs ... but I'm sure someone more in the know can start throwing numbers up.
 
deltal1011man
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 12:23 am

Quoting litz (Reply 1):

An airline that makes its own jet fuel is beholden solely to the price of a barrel of oil for the source material for the refinery ... and if they can undercut the market price for the end-product (jet fuel) with that refinery, they can reap savings over the competition on their fuel needs ... with a side bonus of being able to sell off the undesired byproducts for additional profit.

right. May not be able to control the price of oil but this should help with Jet A prices. (if anything make them a little more stable.)

Quoting FlyASAGuy2005 (Thread starter):

the idea is they can hopefully get the control of price of fuel a little. I had heard this was coming....but its been coming for as long as i have been alive. Hell maybe they will get a true 100 seater too.   
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LAXintl
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 12:33 am

Several airlines have their fingers in the energy business.

Here in the US for example United Airlines is involved with United Aviation Fuels Corporation and also United Cogen based in San Francisco a power projects/natural gas company.

Additionally various purchasing, delivery and storage systems around the US belong to airlines or consortium's of airlines.
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mayor
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 12:35 am

Quoting FlyASAGuy2005 (Thread starter):
Thoughts? Their angle?

Back in the 70s, DL owned their own pipeline, but I don't remember when they sold it.....probably when the oil business went sour in the late 80s.
"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
 
catiii
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 12:38 am

Quoting mayor (Reply 4):
Back in the 70s, DL owned their own pipeline, but I don't remember when they sold it.....probably when the oil business went sour in the late 80s.

I think it was called Epsilon, right?
 
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enilria
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 12:48 am

Quoting litz (Reply 1):
I have no clue if there's any way to do so profitably ... or what this thing's production output would be compared to their needs ... but I'm sure someone more in the know can start throwing numbers up.
Quoting DeltaL1011man (Reply 2):
right. May not be able to control the price of oil but this should help with Jet A prices. (if anything make them a little more stable.)

This is happening because of the growth in the crack spread and the variance between Brent and WTI prices. You can be sure this will only help Delta and I wouldn't count on it doing anything for JET A prices otherwise. There is sufficient existing supply. The issue is the profit margin on "cracking". If Delta opens a JET A refinery another refinery will probably convert from JET A to something else to offset the glut, but Delta will benefit by profiting from the crack spread instead of being beholden to it.
 
doug_or
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 12:52 am

Quoting litz (Reply 1):
An airline that makes its own jet fuel is beholden solely to the price of a barrel of oil for the source material for the refinery ... and if they can undercut the market price for the end-product (jet fuel) with that refinery, they can reap savings over the competition on their fuel needs ... with a side bonus of being able to sell off the undesired byproducts for additional profit.

I can't imagine Delta will actually use the products refined at this facility, at least not in larger quantities than any other airline. The idea would presumably to act as a hedge- when Jet A prices were high the refineries profits would offset higher fuel costs at DL, increasing financial stability.
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prebennorholm
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 1:28 am

Quoting FlyASAGuy2005 (Thread starter):
Thoughts?

To me this seems rather silly. But then my view may be colored by the fact that I have spent all my professional career in the oil business.

If my company had owned only one (or a few) refineries instead of dozens, then that part of the business would have run with great losses year on year.

Refineries are very hi-tech business nowadays. Large scale is the only way to provide profitability.

Imagine an airline company with only one airliner, but having own training department for new crews, own maintenance facility including D check, own catering, own IT department for ticketing, etc, of course there is no way it could work.

In the same way "my" oil company with well over a hundred thousand employees world wide generates a couple of thousand airline pax each day. Enough traffic to keep a few extra airliners busy year around. Should we run our own airline company? Of course not.

We do, however, have a few biz jets. They are used surprisingly little for bringing high management around - they use scheduled airlines. The biz jets are to a high degree used for bringing specialist teams around the world for for trouble shooting at our refineries.
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N62NA
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 1:46 am

Didn't VS announce a few years ago they would produce their own bio-fuels plant to become "fuel independent?" Stranger things have happened!
 
BD338
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 1:46 am

Quoting prebennorholm (Reply 8):
To me this seems rather silly. But then my view may be colored by the fact that I have spent all my professional career in the oil business.

Yep, I don't get it either. They have no experience in operating a completely different industry.

185,000 barrel a day facility will generate what 750-800,000 gallons per day of Jet A? What are they going to do with the other 7 million gallons of products? How are they going to sell and distribute it? Seems they are looking at buying a small scale operation to get 10% of their products which will serve around 25% of their average daily fuel needs? A good opportunity to suck management time out of what they do best...running an airline.
 
deltal1011man
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 1:49 am

Quoting BD338 (Reply 10):
What are they going to do with the other 7 million gallons of products?

did you read the link? They will have to sign some kind of product to sell of the heating oil/gas that isn't used.
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MountainFlyer
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 2:15 am

Quoting doug_Or (Reply 7):
I can't imagine Delta will actually use the products refined at this facility, at least not in larger quantities than any other airline. The idea would presumably to act as a hedge- when Jet A prices were high the refineries profits would offset higher fuel costs at DL, increasing financial stability.

   IMHO, this would be nothing more than a hedging tool. Any savings DL might generate by owning their own refinery would be lost in the cost of transportation and distribution to even just their primary usage points (primarily the big hubs) if they used exclusively fuel from their owned refinery.
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BD338
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 2:36 am

Quoting DeltaL1011man (Reply 11):
did you read the link? They will have to sign some kind of product to sell of the heating oil/gas that isn't used.

yep, read it. Question remains, what are they going to do with it? Yes, they have to sign an agreement but how for such a small scale output? If a large oil company couldn't make the refinery pay, how is an airline only interested in 10% of the product going to make it work.
 
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mayor
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 2:57 am

Quoting catiii (Reply 5):

I think it was called Epsilon, right?

You could be right.......I'm not sure if I ever did know the name, just that DL did own one.
"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
 
simairlinenet
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 3:11 am

Quoting N62NA (Reply 9):
Didn't VS announce a few years ago they would produce their own bio-fuels plant to become "fuel independent?"

Someone is on the right track here...

Quoting catiii (Reply 5):
I think it was called Epsilon, right?

Epsilon Trading is still a subsidiary of Delta.
 
AAIL86
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 3:15 am

Could be a very good idea if the price is right. I've personally always wondered why more airlines don't use more vertical integration to control costs. Delta could be on to something here...
The way to see by faith is to shut the eye of reason - Benjamim Franklin
 
FlyASAGuy2005
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 3:21 am

Quoting prebennorholm (Reply 8):

This is why I raised the question. Refineries have been shutting down left and right. The largest (maybe second largest) oil refinery in the western hemisphere located on St. Croix, US Virgin Islands not too long ago announced plans to shut down that plant. From what i've been told, it's a money loosing business especially with many of the sites being ran off of old technology and using fuel to run the operation when newer sites are using other forms of energy.
What gets measured gets done.
 
slcdeltarumd11
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 3:24 am

Where is this refinery located?
 
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mayor
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 4:13 am

Quoting slcdeltarumd11 (Reply 18):
Where is this refinery located?

I believe the article said Philadelphia.
"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
 
Flyboy1108
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 5:49 am

Quoting slcdeltarumd11 (Reply 18):
Where is this refinery located?
Quoting mayor (Reply 19):
I believe the article said Philadelphia.

Yea its on the Delaware river about 10 miles south of PHL. Sunoco also just shut down their refinery in Marcus Hook, and they're trying to close their Philadelphia refinery this summer. The reason from what I understand is that most refineries in the Northeast US tend to refine Brent shipped over from the North Sea, and that averages $10-$15 more a barrel than WTI does, and fuel prices don't reflect this. I admit I'm quite intrigued by this, and given that DL has several "wholly owned" divisions that have little or nothing to do with aviation, if anyone can figure this out and succeed it's them. If it proves to be successful, with all the closed/closing refineries here and other places across the US there's plenty of opportunity for other airlines to take a shot.
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ssteve
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 6:21 am

I thought the refining business had worse margins than airlines. The idea that Delta needs a refinery to save on gas is like Exxon announcing that they're buying Pinnacle (yeah, small and unprofitable) to save on their corporate travel. Just doesn't make sense.

So Delta's not going to be using the fuel directly. I too think it could be a hedge play of some sort, but how will that work, exactly?
 
NUAir
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 6:42 am

This sounds like a disaster.

Trainer is losing money and the economics of the refinery don't work. If they did another oil company would have snatched it up years ago when Conoco first tried to offload it.

It's extremely short sighted to make a huge multi-billion dollar investment on an oil production facility because crack spreads today are high. It's an extremely cyclical market and for every period of high spreads you have an equal (or greater) period of low spreads. Not to mention there is no pipeline that runs south from Philly to Atlanta and any jet supply transportation costs for Delta (via barge or rail) are going to far outweigh the cost for them to acquire product coming up from Texas and Louisiana. At best Delta will be trading most of the product to the Northeast market at a substantial loss.

You can't convert a refinery to produce 100% jet fuel and Trainer is configured for maximum gasoline production (over 58%), they are going to have to figure out what to do with millions of gallons of gasoline in a market that is being flooded by cheaper gasoline from European refineries from a continent that is increasingly moving to diesel, not to mention the fuel oil that is sold at a substantial loss to crude.

The only hope for this refinery is a multi-billion dollar expansion and addition of a large coker but Conoco dropped the idea due to the high investment costs and lack of available land around the refinery for the required units and storage.

If Delta wants a refinery buy one that has max distillate production and actually makes money in the gulf coast. Gulf Coast refineries are almost all linked up to pipelines that supply Atlanta, Minneapolis, Memphis, Cincinnati, Detroit and even NY...where Delta would actually need the product.
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ORDJOE
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 11:16 am

This seems like a bad idea for several reasons, first off refining is not that profitable for oil companies, exploration is where it is at. Second this refinery will have to buy crude from someone. Lastly they will either have to start a JV or pay a huge mgmt fee for this to be run, trust me there is no one at DL that can run this. That partnership would erode profits.


Them being in the pipeline business was a better idea, pipelines are hugely profitable.
 
nomadd22
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 11:46 am

It's not a good idea for keeping prices stable. Just the opposite, in fact. Oil companies can stay profitable during price swings by making money downstream one day and upstream the next. Make it in crude production when oil prices are high and refining when they're low. Only being on the refining end kills that balance. The world is full of refineries that lose money.
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enilria
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 1:02 pm

Quoting ORDJOE (Reply 23):
This seems like a bad idea for several reasons, first off refining is not that profitable for oil companies, exploration is where it is at.

As I posted earlier, the crack spread for jet fuel has grown considerably from historical levels. That's really the issue. It would appear that due to lack of competition, the refining of JET A has become quite profitable.
 
NUAir
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 1:19 pm

Quoting enilria (Reply 25):
As I posted earlier, the crack spread for jet fuel has grown considerably from historical levels. That's really the issue. It would appear that due to lack of competition, the refining of JET A has become quite profitable.

This should be a clear warning to Delta that even when crack spreads are at historic highs this refinery would still barely operating at break-even (the refinery has been shut down since September). As soon as spreads start to fall it will continue to be a money loser...which is exactly why most of the refineries in the Northeast are shutting down.

It has been and always will be a cyclical industry. Just because crack spreads are high today due to good margins on distillates it means nothing for margins tomorrow. With large refinery complexes coming online in South Asia, China and the Middle East a lot of distillate is going to be coming into the European market in the near future. As that happens the crack spreads will start to erode in the Atlantic and again small non-complex refineries in the US northeast are going to be very badly positioned...which is why most of them are in the process of shutting down.

Buying refinery assets at the peak of a crack spread bubble is never a good idea...just ask Tesoro.

[Edited 2012-04-04 06:38:02]
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FlyASAGuy2005
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 2:56 pm

Quoting NUAir (Reply 22):
The only hope for this refinery is a multi-billion dollar expansion and addition of a large coker but Conoco dropped the idea due to the high investment costs and lack of available land around the refinery for the required units and storage.

That was the #1 reason why HOVENSA shut down in STX. The plant would have required a coker unti to reman viable going forward. Neither HESS nor the Colombians were wlling to spnd the money to do it.
What gets measured gets done.
 
ORDJOE
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 3:11 pm

Quoting enilria (Reply 25):
As I posted earlier, the crack spread for jet fuel has grown considerably from historical levels. That's really the issue. It would appear that due to lack of competition, the refining of JET A has become quite profitable.

Having actually worked at a refinery I will agree with the spreads, but if all you want is the JET A, then those spreads will seem cheap compared to running a refinery, people actually in the oil business would crush this operation. The only way that this could be pulled off is setting up some sort of JV, and by the end of the day DL still would not be making or saving all that much.

Trust me oil refineries are a money losing operation, they are there to give a reason to go exploring and drilling, that is where the money is (and pipelining)
 
bobnwa
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 4:06 pm

Quoting NUAir (Reply 22):
t's extremely short sighted to make a huge multi-billion dollar investment on an oil production facility because crack spreads today are high. It




Where are getting"multi billions from?
 
stlgph
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 4:21 pm

Quoting FlyASAGuy2005 (Thread starter):
The MRO company their going into with Aero Mexico, etc. etc. but an oil refinery?

this has actually been in the works for a few years.
if assumptions could fly, airliners.net would be the world's busiest airport
 
NUAir
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 5:39 pm

Quoting bobnwa (Reply 29):
Where are getting"multi billions from?

- purchase price = maybe $400 million?
- restart costs (since its currently shut down) = $1-2 million
- adding upgrading capacity and reconfiguring for distillate production = $800-$1,200 million
- 300,000+ barrels of crude to get things started = $37 million +

They could skip step three but then they would probably be better off just throwing money into a furnace to generate electricity.

[Edited 2012-04-04 10:43:05]
"How Many Assholes we got on this ship?" - Lord Helmet
 
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litz
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Delta Makes Bid For Oil Refinery?

Wed Apr 04, 2012 7:21 pm

Quoting doug_Or (Reply 7):
I can't imagine Delta will actually use the products refined at this facility, at least not in larger quantities than any other airline. The idea would presumably to act as a hedge- when Jet A prices were high the refineries profits would offset higher fuel costs at DL, increasing financial stability.

Whether they use the actual product from the refinery really doesn't matter ...

Any Jet-A they produce is used as a commodity exchange for Jet-A wherever they DO need it ...

e.g., they need 75,000 gallons of Jet-A delivered to Hartsfield ... some oil company (e.g., BP, Shell, whomever) delivers it in ATL, and takes an equivalent amount from the refinery output as collateral.

As for the "other products", it said quite clearly that they'd have to find an outlet for it, probably directly into the international commodities market.

To them, any sale of that stuff is just gravy to help offset production costs of the jet fuel.
 
prebennorholm
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Delta Makes Bid For Oil Refinery?

Thu Apr 05, 2012 12:36 am

Quoting enilria (Reply 25):
It would appear that due to lack of competition, the refining of JET A has become quite profitable.

You don't refine Jet A.

You refine crude oil, and then you get anywhere from zero to 15% Jet A depending on crude oil type and refinery configuration. In addition you get 85-100% gasoline, LPG, diesel oil, marine diesel fuel, heavy fuel oil, bitumen etc. And you'd better have one hell of an experience in duing that right, or you end up with most products outside 2012 quality specs. Maintaning that know how with one refinery only, is impossible. Running it in a JV, where you contribute nothing but the investment, that will be an enormous economic hole in the ground.

Your comment about competition is 180 degrees wrong. The very stiff competition is the only reason for refineries being shut down for scrapping or offered for sale.
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PIEAvantiP180
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Delta Makes Bid For Oil Refinery?

Thu Apr 05, 2012 10:56 am

Don't know how accurate the report was that I watched last night but they were saying that they could possibly save .05$ per gallon of jet a. DL paid about 12.2 billion for fuel last year. That would equate to about 200-220 million in yearly fuel savings. I'm not sure if that's enough savings to invest that kind of money in a refinery. Unless they plan to make the rest of their money in selling other oil products coming out of the refining process.
 
KarlB737
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Delta Makes Bid For Oil Refinery?

Thu Apr 05, 2012 3:11 pm

A video report from CNBC on the subject:

Courtesy: CNBC

Delta Eyeing ConocoPhillips Refinery for More than $100 Million

http://video.cnbc.com/gallery/?video...oo|headline|quote|video|&par=yahoo
 
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enilria
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Delta Makes Bid For Oil Refinery?

Thu Apr 05, 2012 3:36 pm

Quoting NUAir (Reply 26):
As soon as spreads start to fall it will continue to be a money loser...which is exactly why most of the refineries in the Northeast are shutting down.
Quoting prebennorholm (Reply 33):
Your comment about competition is 180 degrees wrong. The very stiff competition is the only reason for refineries being shut down for scrapping or offered for sale.
Quoting ORDJOE (Reply 28):
Trust me oil refineries are a money losing operation, they are there to give a reason to go exploring and drilling, that is where the money is (and pipelining)

Actually you are all wrong. The reason why East Coast refineries have shut down is because of the price difference between WTI and Brent. The East refineries are fed from North Sea Brent which is about 20% higher than WTI. Thus, fuel refined at those refineries is uncompetitive with Midwest fuel. Thus, the refineries have shut.

Quoting NUAir (Reply 26):
Buying refinery assets at the peak of a crack spread bubble is never a good idea...just ask Tesoro.

The issue for JET A from what I have read is that WTI is too coarse for efficient production of JET A. The reason why the JET A crack spread has gotten higher and higher is because these East Coast refineries are shutting down because of the oil price imbalance driven by gasoline which is the core product and the Midwest supply stream from WTI is not producing sufficient quantities of JET A thus driving the crack spread higher.

Increased production of North Dakota oil is expected to worse the problem as Midwest oil will get even cheaper vs. Brent.

Quoting prebennorholm (Reply 33):
Quoting enilria (Reply 25):
It would appear that due to lack of competition, the refining of JET A has become quite profitable.

You don't refine Jet A.

You are splitting hairs. OK, the refining that results in JET A.
 
aviationbuff08
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Delta Makes Bid For Oil Refinery?

Thu Apr 05, 2012 6:22 pm

Quoting PIEAvantiP180 (Reply 34):
Don't know how accurate the report was that I watched last night but they were saying that they could possibly save .05$ per gallon of jet a. DL paid about 12.2 billion for fuel last year. That would equate to about 200-220 million in yearly fuel savings. I'm not sure if that's enough savings to invest that kind of money in a refinery. Unless they plan to make the rest of their money in selling other oil products coming out of the refining process.

This is certainly an interesting idea, but would just one refinery provide sufficient cost savings or would they need 3-6 of them. Could they possible sent the Jet A and diesel and gas to LGA/JFK hub operations? I know Jet A is the primary interest but there is lots of ground equipment that uses diesel and gas at both airports.
 
speedbird9
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Delta Makes Bid For Oil Refinery?

Thu Apr 05, 2012 7:12 pm

just found this interesting video on Reuters:

http://uk.reuters.com/video/2012/04/...eoId=232941736&videoChannel=117789

barmy or stroke of genius?

my opinion barmy

[Edited 2012-04-05 12:13:48]
 
burnsie28
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Delta Makes Bid For Oil Refinery?

Thu Apr 05, 2012 7:25 pm

Quoting BD338 (Reply 10):
185,000 barrel a day facility will generate what 750-800,000 gallons per day of Jet A? What are they going to do with the other 7 million gallons of products? How are they going to sell and distribute it? Seems they are looking at buying a small scale operation to get 10% of their products which will serve around 25% of their average daily fuel needs? A good opportunity to suck management time out of what they do best...running an airline.

Just because you own something doesn't mean that your overall holding company executive management is running it.
 
FlyASAGuy2005
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Delta Makes Bid For Oil Refinery?

Thu Apr 05, 2012 8:34 pm

Quoting burnsie28 (Reply 39):
Just because you own something doesn't mean that your overall holding company executive management is running it.



  

get the right people in to run the subsidiary with Delta Air Lines, Inc. owning the site.
What gets measured gets done.
 
glbltrvlr
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Delta Makes Bid For Oil Refinery?

Thu Apr 05, 2012 10:49 pm

Quoting MountainFlyer (Reply 12):
Any savings DL might generate by owning their own refinery would be lost in the cost of transportation and distribution to even just their primary usage points (primarily the big hubs) if they used exclusively fuel from their owned refinery.

It's worse than that. The crack spread covers the cost of operating the refinery as well as operating profits. If Delta gives themselves a discount on Jet-A from their own refinery, the refinery's margins go down and they own an unprofitable business. If they sell to themselves at market (which I think they are required to do, at least on the books), what have they bought themselves other than a headache?

With the emphasis on getting rid of non-core operations, Wall Street will kill them if this is anything more than someone talking out of the side of their mouth.
 
prebennorholm
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Delta Makes Bid For Oil Refinery?

Fri Apr 06, 2012 1:28 am

Quoting enilria (Reply 36):
The East refineries are fed from North Sea Brent which is about 20% higher than WTI. Thus, fuel refined at those refineries is uncompetitive with Midwest fuel.

Wrong. The price variations on Brent and WTI (West Texas Intermediate) totally mirrors the composition of the crude. You get that more high value fuels out of Brent compared to WTI.

In fact such things as Brent or WTI crude oil hardly exist in reality. Every oil well has a unique crude composition.

Brent and WTI are just two different market defined crude compositions used as technical guidelines for adding or subtracting some percentage to prices depending on actual oil field and its crude quality. For crude from other parts of the world other such technical pricing guidelines are used, such as the "OPEC Reference Basket" or "Dubai Crude".

However, during the later years the Brent benchmark is being used a lot more widespread for international trade, also for trading crude oil which has never seen the North Sea or Europe. It has become the world's by far mostly used benchmark for pricing crude oil whether it actually comes from the North Sea, Russia, Middle East or elsewhere.

The Brent pricing formula was defined almost fifty years ago by Shell as a certain blend of crude from fifteen different oil fields in or around the North Sea.

Shell has a habit of naming their oil fields with bird's names. Brent is a small, migrating goose which is breeding in northern Russia and Siberia, while wintering mostly on southern coastlines of Britain and Ireland. Its Latin name is Branta Bernicla.
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masseybrown
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Delta Makes Bid For Oil Refinery?

Fri Apr 06, 2012 3:18 am

AA bought some wells during the 1970's Carter-era fuel crisis. I believe they sold them at a loss in the 80's. It seemed like a good idea at the time.
 
IADCA
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Delta Makes Bid For Oil Refinery?

Fri Apr 06, 2012 3:28 am

Quoting prebennorholm (Reply 42):
In fact such things as Brent or WTI crude oil hardly exist in reality. Every oil well has a unique crude composition.

And an increasing percentage of the active fields produce stuff that the East Coast refineries can't handle. The ones that have been upgraded recently have taken a lot of work to be able to handle heavier, more sour grades. That oil (e.g., Angolan production) is cheaper on the market than the good stuff, but it's useless if you can't handle it. A good deal of the price difference between such oil and Brent or WTI is specifically because most older refineries - like those on the East Coast - simply can't do much with it, whereas newer facilities can handle many more grades.
 
KarlB737
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Delta Makes Bid For Oil Refinery?

Thu Apr 12, 2012 4:22 pm

Courtesy: Bloomberg News

Delta Said To Seek 10% Fuel Savings With ConocoPhillips Refinery

"Delta uses about 3.9 billion gallons of jet fuel a year, which translates to about 254,000 barrels a day. A 1-cent a gallon price increase equals $40 million more in costs on an annualized basis. Jet fuel for immediate delivery in New York Harbor has averaged $3.12 a gallon in the past 12 months before today. Five years ago from yesterday, the trailing 12-month average was $1.94."

http://www.bloomberg.com/news/2012-0...ophillips-refinery.html?cmpid=yhoo
 
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litz
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Delta Makes Bid For Oil Refinery?

Thu Apr 12, 2012 5:02 pm

10% is no laughing matter ... if that pans out, the economics of this kind of deal are obvious.

If this works out, could be a trendsetter.
 
NUAir
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Delta Makes Bid For Oil Refinery?

Thu Apr 12, 2012 5:23 pm

Quoting litz (Reply 46):
the economics of this kind of deal are obvious.

So Delta Airlines saves 10% on jet fuel costs but Delta refining loses 10% on jet fuel sales to Delta Airlines compared to what they could have sold to the market.

I would love to know where Delta will come up with the money to upgrade this refinery to meet environmental and safety regulations not to mention meeting future fuel specification standards...types of things Delta will get to deal with in the future...

"OSHA cited ConocoPhillips’s Trainer, Pa., refinery for 27 violations that the agency said could lead to serious injury and possible death, reported The Delaware County Daily Times.
OSHA issued 26 serious violations with penalties totaling $91,500 and one repeat violation, carrying a $25,000 penalty, for a total of $116,500 in penal- ties."

"The Trainer facility had to pay $129,524 in penalties to the Department of Environmental Protection last December for air-quality violations. One of these violations was a hydrocarbon emission Feb. 10, 2007 that forced the voluntary evacuation of area residents.
The DEP said ConocoPhillips incor- rectly reported emissions of sulfur oxides in 2002 and 2004. In 2006, DEP noted excess emissions of sulfur dioxide, hydrogen sulfide, isobutene and propane, as well as minor tank violations at the Trainer facility."
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GSPSPOT
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Delta Makes Bid For Oil Refinery?

Thu Apr 12, 2012 5:52 pm

Can you say, "vertical integration"? (Econ 101) If you have enough $$ on hand, you can do things like that I suppose. I say it's a smart move, and more power to them! Surprised WN hasn't come up with a similar scheme already, seeing that they're based in Texas & all...
Finally made it to an airline mecca!
 
NUAir
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Delta Makes Bid For Oil Refinery?

Thu Apr 12, 2012 6:11 pm

Quoting GSPSPOT (Reply 49):
Can you say, "vertical integration"? (Econ 101) If you have enough $$ on hand, you can do things like that I suppose. I say it's a smart move, and more power to them!

Vertical integration has worked so well for the oil companies that the majors have sold off 60% of their refining assets due to low returns?

I guess you don't learn about economies of scale and scope until Econ 102.

Quoting mayor (Reply 48):
THE JET FUEL THAT RESULTED WOULD BE SOLD BACK TO DELTA AT EFFECTIVELY FULL SALE PRICES AND THE OTHER PRODUCTS THAT COME OUT OF THIS PARTICULAR PLANT WHICH INCLUDE KEROSENE, DIESEL AND A FEW OTHER THINGS, COULD BE SOLD NEW NEW: Thomsonfly (United Kingdom)">BY JPMORGAN ON THE OPEN MARKET.

Someone explain to me how Delta taking all the risk by buying the facility and plunking down a few hundred million for the refinery and upgrades and letting JP Morgan capture all the "profits" is a good thing for Delta? Delta gets to trade diesel and gasoline for jet fuel from the oil companies at market rates?

If anyone thinks Delta is smarter than JP Morgan and the oil companies and will actually come out on top on this deal you should probably get your head checked.
"How Many Assholes we got on this ship?" - Lord Helmet