US Delta Air Lines to purchase Philadelphia refinery

30 April 2012 23:11  [Source: ICIS news]

A Delta Airlines jetHOUSTON (ICIS)--Delta Air Lines reached an agreement to purchase the idled Trainer refinery in Pennsylvania from Phillips 66, said the airline carrier on Monday.

Delta’s acquisition includes the 180,000 bbl/day Trainer refinery and pipelines and transportation assets that will provide access to the delivery network for jet fuel reaching Delta's operations throughout the Northeast, including its hubs at LaGuardia and JFK airports in New York.

The Pennsylvania state government agreed to provide $30m in assistance for job creation and infrastructure improvement. Monroe Energy, the owner of Delta Air Lines, will purchase the refinery for $150m and spend an additional $100m to convert existing infrastructure in order to maximise jet fuel production, the company said.

"Acquiring the Trainer refinery is an innovative approach to managing our largest expense," said Delta’s CEO Richard Anderson. "This modest investment, the equivalent of the list price of a new wide-body aircraft, will allow Delta to reduce its fuel expense by $300m annually and ensure jet fuel availability in the Northeast."

Delta has arranged a multi-year agreement to exchange production of gasoline, diesel, and other refined products from the refinery for jet fuel. The jet fuel received and produced at the refinery will provide 80% of US Delta’s jet fuel requirements, the company said. This is part of a marketing agreement with Phillips 66 and BP.

In addition, Monroe Energy has a three-year agreement with BP to receive crude oil to be refined at the facility, the company said. Previously, the east coast refineries have operated using expensive imports of crude oil.

"By working with world class partners like BP and Phillips 66, we can benefit from their expertise in energy sourcing and product distribution," said Delta's president Ed Bastian.

A BP official said the agreement with Monroe Energy demonstrates BP’s commitment to supply US customers with energy products.

“We are delighted to bring BP's global scale and access to the world's energy markets to this strategic agreement with Delta," said BP’s CEO of Integrated Supply and Trading Paul Reed.

Delaware County and the Commonwealth of Pennsylvania will provide assistance to be certain the refinery continues to contribute economically to the region.

The refinery operations will be lead by Jeffrey Warmann, a 25-year veteran in the refining industry.

Monroe expects to close on the acquisition in the first half of 2012 with jet fuel production expected to start in the third quarter, the company said. Modifications to plant infrastructure for higher jet fuel yields will be complete by the end of the third quarter, resulting in expected 2012 fuel savings of more than $100m.

By: Sheena Martin
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