July 23, 2012:

PBF Energy will spend up to $60 million to build additional rail infrastructure at its 190,000-barrel-per-day refinery in Delaware City, Delaware, allowing the refinery to take advantage of increasing production of North American crude oil production, a source familiar with the situation said on Monday. The company will put its Clean Fuels project on the back burner in order to use its capital on shorter-term projects, said Michael Karlovich, a spokesman for PBF Energy. Originally, the company envisioned a three-year Clean Fuels project where it would spend $1 billion on a hydrocracking unit and hydrogen plant to increase distillate production from the refinery. Its sister refinery, across the Delaware River in Paulsboro, New Jersey would also benefit from the expansion.

Now, PBF is looking to internally generate working capital to invest in the Clean Fuels project. Spending less money on a shorter-term project to provide the plant with less expensive crude will help do that. Details of the rail expansion capacity are still being worked out. "The decision was reached last week," said Karlovich about the change of plans. "So we are still in the planning stages," he added. The refinery is flexible in being able to process heavier, traditionally less expensive crudes instead of only the normal East Coast refinery diet of imported light, sweet crudes. The additional rail infrastructure will allow the refinery access to both less expensive Canadian crudes as well as crude from the Bakken shale oil formation in North Dakota.

The refineries along the East Coast of the U.S. have faced high crude prices because historically they have run light, sweet crude imported from the North Sea and West Africa. The surging production from North Dakota's Bakken shale oil formation and other crudes have made it possible for refineries at risk for closure -- like Sunoco's 330,000 bpd Philadelphia refinery and the neighboring 185,000 bpd Trainer refinery -- to operate economically by replacing part of their expensive foreign crude slate with less expensive domestic crude, despite logistical challenges of moving crude oil by rail.

By Reuters