FocusOil spill still looms over US Gulf chem exports

05 May 2010 19:32  [Source: ICIS news]

Slick spreads toward coastBy Ben DuBose and Ryan Hickman

HOUSTON (ICIS news)--The growing oil slick from the sunken Deepwater Horizon offshore rig poses the potential to disrupt shipping and threaten a thriving export business for US Gulf-based chemical and refined products producers, sources said on Wednesday.

In Louisiana – 50 miles (80 km) from the site of the Gulf explosion - the state’s chemical industry ships 10% of its product overseas and that figure was on the rise, said Dan Borne, president of the Louisiana Chemical Association.

“Exports are increasing because of the natural gas cost advantage that we have over oil in Europe as to ethylene production right now,” Borne said. “If the spill impedes navigation or access [to ports], that’s significant.”

The 20 April blast on Transocean's offshore rig and subsequent flow of oil from BP's well it was drilling produced a waterborne oil patch that had been drifting towards the coastlines, ports and petroleum production sites of Louisiana, Mississippi, Alabama and Florida.

Nearly half of all US refining capacity is located along the Louisiana, Mississippi and Texas coasts, according to the American Petroleum Institute (API).

"Everyone is in a wait-and-see mode to see what the weather does and how successful BP is in stopping the flow," said Rick Mueller, an analyst with Energy Security Analysis in Wakefield, Massachusetts.

Mueller said that pre-summer driving season inventory levels in crude oil were high, providing a supply buffer in case imports became restricted to US Gulf coast refineries such as Motiva's Norcro and Convent refineries and ExxonMobil's Chalmette complex, all in the New Orleans area.

Shell spokesman Ted Rolfvondenbaumen said the company was continuing to monitor the situation in the Gulf and would not provide any details on its feedstock supplies at the two Motiva refineries.

Motiva is a joint venture with Shell Oil, an affiliate of Royal Dutch Shell, and Saudi Refining, a subsidiary of Aramco Services.

Meanwhile, the chemical plant at Chalmette is part of a refinery that is a 50-50 joint venture between ExxonMobil and the Venezuelan state-owned oil company Petroleos de Venezuela SA (PDVSA).

Its aromatics production includes 270,000 tonnes/year of paraxylene (PX) as well as 185,000 tonnes/year of benzene and 360,000 tonnes/year of toluene.

ExxonMobil did not immediately respond to an inquiry seeking comment.

A source with one US Gulf producer said raw material supplies to such facilities might not be significantly impacted, since many producers received those via pipeline and railcar.

For instance, Huntsman's maleic anhydride (MA) production facility in Geismar, Louisiana, was supplied with raw material by pipeline, a company source said. And Huntsman's MA plant in Pensacola, Florida, could receive feedstocks by truck if barges were not allowed into the coast.

The exception would be if the Mississippi River had to close for any length of time, which could force producers to scramble to secure additional trucks and railcars to keep material flowing, the source said.

A spokeswoman with the Association of American Railroads (AAR) said it had yet to see any spill-related effects, while a call to the American Trucking Association (ATA) was not immediately returned.

For chemical plants, the more pressing problem, according to the source, could be the shipment of export barges.

"If there was an effect, the shipment of material anywhere should not be affected," the source with Huntsman said. "Exports could be shipped from other than Gulf coast ports if needed."

Another producer source on the US Gulf said that the likely export scenario would have suppliers sending material by rail or tank truck to Houston and send it out of the port of Houston.

However, the port of Houston could become bottlenecked if a rush of traffic came from the oil spill-affected area, according to the source.

Officials at ports in New Orleans, Gulfport, Mississippi, and Mobile, Alabama said that all shipping lanes remained open, adding that a three-day forecast did not show any significant changes through late Friday.

However, Jimmy Lyons - director and chief executive for the Mobile port - said that one vessel had gone through light oil sheen and was being inspected.

As such, Mobile officials were urging vessels to use easterly approaches to avoid potential contact with the spill area.

Shell has an 86,000 bbl/day refinery in Saraland, Alabama, and a chemical facility in Mobile that sit on the coastline.

At the port of New Orleans, a key feedstock entryway trading route for a slew of chemical buyers and sellers, spokesman Chris Bonura said ship traffic remained unrestricted as the Southwest Pass – the main pass for deep draft navigation – remained clear of oil.

Even if light oil sheen were to appear, the US Coast Guard expected that ships would not need cleaning for the time being as long as they moved at a safe pace, Bonura said.

Earlier, the US Coast guard announced that BP capped one of the three leaks from the rig.

The well has spewed more than 200,000 gal/day (757,000 litres/day) of oil since the 20 April explosion, with some reaching the US shoreline, according to reports.

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