Refining In Pennsylvania, Does it Have a Future?

abarrelfullabarrelfull wrote on 06 Oct 2011 08:46
Tags: pennsylvania refinery

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Pennsylvania has a longer Oil & Gas history than anywhere else on earth.

Pennsylvania has the proud heritage of being the first place in the world where a commercially successful well was drilled for oil production. Edwin Drake drilled the first well in 1859 in Venango County, near Titusville. Paraffin-based “Pennsylvania Grade” crude oil is renowned for its lubricating qualities. More than 350,000 oil and gas wells have been drilled in Pennsylvania since that time.

Now the days of massive oil production are long gone.

In 2009, Pennsylvania produced about 3.6 million barrels of crude oil

In a world were WTI crude oil is selling at a massive discount to Internationally traded Brent, this lack of local crude is putting Pennsylvania based refineries at a massive disadvantage.

Last week Conocophillips announced it was looking for a buyer for its Trainer Refinery. This comes just weeks after Sunoco announced the sale or closure of its Marcus Hook Refinery and Philadelphia Refinery.

Now the future of 700,000 barrels per day of refining capacity is in the balance. This represents 90% of all refinery capacity in the State. If these three refineries are closed then two small refineries will be all that remains. Bradford Refinery with just 10,000 bpd of capacity and Warren Refinery with 70,000 bpd. Compare that to how EIA describes the state today.

Pennsylvania is the leading petroleum-refining State in the Northeast

Unless buyers can be found, refining is going to be a thing of the past. Moreover, the refineries have a big structural problem. Crude Oil. They process some of the most expensive grades in the world including Bonny Light Crude from Nigeria and Azeri Light Crude Oil from Azerbaijan. So alternatives need to be found to make these refineries viable.

What about the Marcellus you say. Pennsylvania is experiencing an upstream renaissiance thanks to shale gas. Unfortunately its not going to help. In the first 6 months of 2011, the Marcellus yielded less than 600,000 barrels of crude and gas condensate. One days worth of feed for these three refineries.

So the future doesn't look too good if you are a refinery worker in the state of Pennsylvania

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