August 28, 2012:

Venezuelan firefighters put out the last of three blazes at the country’s largest refinery following an explosion four days ago that killed at least 48 people. “We’re in a cooling stage now,” Oil Minister Rafael Ramirez said today on state television. “We’re inspecting the affected areas and checking our infrastructure to prepare for restarting operations.” Hercules cargo planes were used to help extinguish flames on two storage tanks at the Amuay refinery last night, President Hugo Chavez said. A blaze at a third tank flared up at least twice today before being contained. Amuay, which has the capacity to process 645,000 barrels a day, forms part of the Paraguana complex 240 miles west of Caracas. Damage was limited to the storage tanks and Venezuela has enough gasoline inventories to meet all commitments, Ramirez said. The shutdown threatens supplies of refined petroleum products as U.S. Gulf Coast plants halt operations with Tropical Storm Isaac heading toward the region. Paraguana General Manager Jesus Luongo said state-owned Petroleos de Venezuela SA will “take its time” to guarantee a safe restart of processing units by ensuring that storage tanks that still contain naphtha fuel are sufficiently cooled.

A gas leak that formed a cloud at the refinery exploded at 1:10 a.m. on Aug. 25, sending a ball of flame into the air and destroying a National Guard post and damaging about 500 homes. Chavez, who faces elections in October, declared three days of mourning and ordered an investigation.

Gasoline Inventories

Venezuela has stockpiles of 4 million barrels of gasoline and other petroleum products and continues to produce 735,000 barrels of the motor fuel a day at plants, including nearby Cardon, according to Ramirez. State-owned Petroleos de Venezuela SA shipped five tankers of crude from Paraguana on Aug. 26, he said at the time.  “It’s probably going to be far longer than their public statements given the track record we’ve seen of maintenance at PDVSA facilities over the last couple of years,” Andy Lipow, president of Houston-based Lipow Oil Associates LLC, said by phone. “I think it concerns the market that it could take a long time given that it’s their largest refining complex.” PDVSA is the sole owner and operator of the refinery. The blast is among the world’s deadliest at an oil refinery. Fifteen workers were killed at BP Plc (BP/)’s Texas City refinery in 2005, while more than 50 people died in a fire at Hindustan Petroleum Corp.’s refinery in Visakhapatnam, India, in 1997.

‘Earthquake Like’

Amuay, Cardon and Bajo Grande form the Paraguana complex, which has capacity of about 950,000 barrels a day. That’s second in size to Reliance Industries Ltd. (RIL)’s Jamnagar refinery in India, according to data compiled by Bloomberg. CRP, as the complex is known, supplies 67 percent of gasoline to the local market, according to PDVSA’s website. Cardon and Amuay also export refined products to the Caribbean and the U.S. Stella Lugo, governor of Falcon state in western Venezuela, described the early-morning blast as similar to an earthquake. Lugo told Union Radio yesterday that the death toll had risen to 48 from a previous estimate of 39. There have been no other official comments about a death toll since Aug. 26. Gasoline for delivery in September, which rallied yesterday, declined 2.89 cents, or 0.9 percent, to $3.1259 a gallon at 3:28 p.m. in New York. BP and other companies suspended some crude and gas operations in the Gulf of Mexico. The area is home to 23 percent of U.S. oil output and 44 percent of refining capacity, according to the U.S. Energy Department.

Stand to Benefit

Refiners with Texas operations that are less exposed to Isaac stand to benefit by exporting more product after the Venezuela explosion, said John Auers, senior vice president at Turner Mason & Company, a Dallas-based energy consultant. “On a sustainable basis, Venezuela hasn’t been able to produce as much product as they used to,” Auers said by telephone. “The U.S. refiners have taken their place. Now in a short term, they certainly can step up and do even more.” Shares in Valero Energy Corp. (VLO), based in San Antonio, Texas, have gained 6.4 percent in the past two days, while Marathon Petroleum Corp., based in Findlay, Ohio, has risen 2.3 percent. The fire at Amuay, which opened in 1950, highlights the risk to supplies of oil products from large, aging plants and may lead to more exports from Asia to the U.S., according to Goldman Sachs Group Inc. Other major refinery fires elsewhere caused months of delays before full operations resumed, Nilesh Banerjee, an analyst at Goldman in Mumbai, said in a note e-mailed yesterday. Venezuela, one of the 12 members of the Organization of Petroleum Exporting Countries and South America’s biggest crude producer, had an average output of 2.7 million barrels of oil a day last year, according to BP statistics. Its main export markets are the U.S. and China.

Crude Exports

Venezuela was the fourth-largest source of crude for the U.S. in May, after Canada, Saudi Arabia and Mexico, at 821,000 barrels a day, based on data from the U.S. Energy Information Agency. Venezuelan product imports from the U.S. nearly doubled in the first five months of 2012 to 38,000 barrels a day from 23,000 in the year earlier period, according to the EIA. They include gasoline, fuel additives and liquefied petroleum gas. Cardon has closed units several times this year after incidents. PDVSA had to halt production and evacuate workers from its Petropiar heavy-crude upgrader last year after a gas leak and a fire. Jose Bodas, an oil union leader, told Globovision on Aug. 25 that PDVSA has ignored calls by workers to improve “hazardous” working conditions at refineries. Seven out of nine planned maintenance programs for the Amuay refinery were postponed last year because of a lack of materials, according to PDVSA’s 2011 annual report.

Maintenance Spending

Ramirez denied that PDVSA has failed to invest in maintenance and said the company spent $6 billion in the past five years on its refining circuit. Chavez also denied reports that the leak of gas had begun hours before the explosion. Repairs to the refinery once the fire is put out will take three to five days if damage is confined to storage tanks, James Williams, an economist at WTRG, an energy-research firm in London, Arkansas, said by phone. Bringing the refinery back online may expose faulty equipment that slows a full recovery in production, leading Venezuela to compete to import gasoline that otherwise would go to other countries, Williams said. “You have to warm everything back up,” he said. “The real problem is the refinery infrastructure which has been poorly maintained.”

By Bloomberg

August 28, 2012:

Pump prices could jump as much as a quarter a gallon over the next week because of oil refinery shutdowns ahead of Tropical Storm Isaac, analysts said. More than 1.1 million barrels of Gulf Coast refining capacity was offline or being shut down Monday because of Isaac's march toward Louisiana. That amounts to about 6 percent of the nation's gasoline production capacity, said Andrew Lipow, president of Lipow Oil Associates in Houston. Those shutdowns came as oil companies stopped operations at facilities throughout the Gulf of Mexico. By noon Monday, more than three-fourths of oil production in the Gulf had been haltedalong with almost half of natural gas production. And a growing number of refineries were flipping the switches, leaving skeleton crews in place. Some were relocating office workers from Louisiana to Houston to keep projects from stumbling into costly delays, said Dane Groeneveld, North America regional director for NES Global Talent. More refinery shutdowns could be on the way, and that will put an immediate, although temporary, squeeze on the nation's gasoline supply. Sixteen percent of the nation's gasoline refining capacity is in the path of the storm along the Gulf Coast, Lipow said. He predicted gasoline prices could rise between 5 cents and 10 cents a gallon over the next few days and stay high for several weeks.

They could jump as much as 25 cents in some parts of the country, including Houston, said Patrick DeHaan, senior petroleum analyst for Gasbuddy.com. The national average price of gasoline Monday was $3.75 for a gallon of regular, according to AAA. It was $3.55 in Houston. As refineries shut down, "supply starts dropping," which results in quick price hikes, DeHaan said. Market concern drove prices for gasoline futures up nearly $7.7 cents in New York Mercantile Exchange trading, to $3.15 per gallon.

Complicating factors

The situation is also complicated by an explosion Saturday at Venezuela's Amuay refinery, which killed dozens and continued to burn Monday. Venezuelan oil officials had insisted the situation was under control, and several analysts said they expect it to have little long-term effect. A Chevron refinery in California that could have helped relieve any strain remains partially offline after a fire earlier this month. Adding further strain to the gasoline market are current supplies. Inventories are down 7 percent from a year ago, and plants that could make up for any production declines are undergoing maintenance, said John Parry, a principal analyst for IHS Herold. Still, any market strain will likely last only days, if at all, as the storm is likely to weaken upon landfall, he said. That would allow refineries to start operations quickly, he said. Marathon Petroleum Corp. was shutting down its Garyville, La., refinery Monday, one of the nation's largest. Its capacity is 490,000 barrels a day. San Antonio-based Valero Energy Corp. on Monday was shutting down its 270,000-barrel-a-day St. Charles refinery as well as its 140,000- barrel-a-day Meraux refinery. Phillips 66 announced late Sunday that it would shut down the 247,000-barrel-per-day Alliance Refinery in Belle Chasse, La. "Right now, the market is kind of assuming no major impact," said David Pursell, managing director and head of securities for Tudor, Pickering, Holt & Co. Crude prices ended the day down 68 cents, at $95.47. Pursell said the market's reaction was based on the assumption that Isaac won't be more than a Category 1 or 2 hurricane and that production resumes within a few weeks in Venezuela.

Placing a bet

Pursell said the market is betting that Isaac won't intensify. "The combination of the Venezuelan fire and the storm bearing down on a part of the Gulf coast with a bunch of refineries, you might expect to see more price action," Pursell said. But with a Category 1 or 2 storm, production platforms should restart quickly, he said. Refineries may be susceptible to storm surges, flooding and power outages. "But with a Category 1, other than shutting down as a precaution, I don't see much lasting impact," Pursell said. He said all energy companies along the Gulf have adapted to the threat of tropical weather in the seven years since Hurricane Katrina. "More than anything, for those susceptible to any kind of storm surge, they have bigger dikes around them," he said. "More broadly, whether it's offshore, pipelines or onshore processing, they all have been strengthened."

By Chron.com

August 28, 2012:

KINGSTON, Jamaica — An extensive fuel spill has fouled a stretch of shoreline and oiled pink flamingos and other wildlife in a nature preserve in Curacao, conservationists and residents of the tiny Dutch Caribbean island said Monday. The leader of a local environmental group asserted Monday that the spill of crude oil at Curacao's Jan Kok preserve was from at least one storage tank owned by the Isla oil refinery, the largest business and employer on the southern Caribbean island best known for its diving opportunities and colorful capital of Willemstad. The island's refinery is run by the state-owned oil company of Venezuela, only about 40 miles away. "This is probably the biggest (environmental) disaster in Curacao," said Peter van Leeuwen of the Stichting SMOC group. "The whole area of Jan Kok is black. The birds are black. The crabs are black. The plants are black. Everything is draped in oil." Curacao-based journalist Dick Drayer, who covers the Netherlands Antilles for Dutch television, estimated that the spill covers an area "of around 30 soccer fields." He added that three distinct oil slicks are floating offshore and are "threatening the southern coast of Curacao." Photographs of Curacao's southern Jan Kok area show a darkened coast and gobs of oil dripping off of coastline rocks and mixing in the surf. Oil-smudged flamingos, crustaceans, and lizards can be seen struggling on the wind-swept reserve of salt flats.

Van Leeuwen said the spill started threatening wildlife sometime last week but cleanup efforts by the company only recently got under way at the nature reserve, no more than 1,000 meters away from big tanks where Petroleos de Venezuela SA stores thousands of gallons of crude oil. "A lot of time has gone by without any action. It's been about one week before somebody at the company has done anything at all," he said, adding that workmen are now excavating holes on Jan Kok's beach to capture the spilled oil and mix it with sand and soil in order to cart it away. Numerous calls to Kenneth Gijsbertha, the Curacao spokesman for the Isla oil refinery, went unanswered Monday. The Isla refinery is a sprawling expanse of metal pipes, chemical converters and concrete by Willemstad's bay. For years, activists have complained about the thick haze of smoke that sometimes blankets the area around the refinery, which can produce roughly 220,000 barrels a day.

Venezuela's state-owned oil company is grappling with arguably more pressing problems. On Saturday, a huge explosion rocked the energy-rich country's biggest oil refinery, unleashing a ferocious fire that killed at least 41 people and injured more than 150 others. Jacintha Constancia, Curacao's minister of public health, environment and nature, also did not answer calls on Monday to explain what the government was doing about the spill or to prevent future accidents. Nena Sanchez, a painter and former "Miss Curacao" who runs a plantation house and art studio on a hillside just above the Jan Kok salt flats, described the oil spill as "definitely extensive." "We're very, very upset about the whole deal. We don't know if the damage is so bad that the flamingos will go somewhere else because there is nothing left to eat here," Sanchez said from her cactus-studded retreat above Jan Kok. Curacao dive shop operator Ingrid Van Den Bosch said she has seen no evidence that the island's world-class diving sites have been impacted by the spill.

By CBSNews

August 28, 2012:

RICHMOND -- A final report on Chevron's massive Aug. 6 refinery fire could potentially lead to prosecution of the energy giant and serve as an impetus for federal regulatory reform, investigators said Monday. "We want to take the lessons learned here to all refineries," said Dan Tillema, lead investigator for the U.S. Chemical Safety Board, a federal agency that has been at the accident site since Aug. 7. Tillema and representatives from four other investigative agencies briefed the public and elected leaders on the status of their probe. The fire broke out in the No. 4 crude unit of the 240,000-barrel-per-day refinery after leaking 600-degree hydrocarbon liquid from an 8-inch pipe created a huge vapor cloud. Four workers suffered minor injuries, and more than 14,000 residents visited area hospitals in the subsequent weeks, complaining of respiratory problems and other discomforts. The investigation and report may take more than a year to complete but will be a comprehensive safety and maintenance evaluation, investigators said at Monday's meeting that included representatives from four of the five principal agencies investigating the fire.

Along with Tillema, Dan Meer from the Environmental Protection Agency, Bay Area Air Quality Management District CEO Jack Broadbent and Contra Costa County's environmental health and hazardous materials chief, Randy Sawyer, were on hand, along with more than 100 members of the media and public who crammed into the Richmond City Council chamber. Broadbent acknowledged problems with the information his agency released the day after the fire. The air quality agency issued public statements concluding that air quality in the area was "not a significant health concern," despite having just six air quality monitors in the Bay Area that take samples only once every several days. In its "haste" to issue emergency information, and working with air-monitoring technology "not designed to support an incident response," the air quality district issued incomplete information.  "We did indeed make a mistake," Broadbent said. The state Division of Occupational Safety and Health did not send a representative to Monday's meeting but did provide a prepared statement from agency Chief Ellen Widess, which was read publicly by City Manager Bill Lindsay.

"If violations are documented, citations and mandatory orders to correct hazards will be issued and monetary penalties assessed," the statement reads. Cal/OSHA spokesman Dean Fryer said last week that Chevron's refinery has a better-than-average worker safety record, but it has been fined several times since 2002 in incidents that involved serious injuries to workers. The Chemical Safety Board, an independent, advisory agency that does not have the power to issue fines or penalties, has called the Aug. 6 fire a "near disaster" and wasted no time dispatching a seasoned team to the site. Tillema said investigators here are veterans who have investigated major petroleum facility failures, including the Deepwater Horizon, an offshore rig that exploded and sank in the Gulf of Mexico in 2010.

While CSB investigators have said repeatedly that the failing 8-inch pipe and Chevron's decision last fall to keep it in service is a "key line of inquiry," Tillema said the investigation is more far-reaching. In recent weeks, the Chevron fire has cast renewed light on the health of aging refineries nationwide, which critics say are monitored by overmatched, underfunded government agencies. Chevron's Richmond refinery has been in operation for more than a century. EPA representative Meer said his agency is investigating the refinery under the auspices of the Clean Air Act, which requires facilities working with dangerous chemicals to develop a Risk Management Program and submit it to the EPA. Meer said the EPA hopes to complete an audit of the refinery's program by October. "If Chevron violated the law, we will prosecute," Meer said. Tillema said safety concerns continue to keep investigators from getting to the failed pipe, which continues to leak hydrocarbons, and conducting metallurgy and other tests. He said he hopes they can get to the pipe by Sept. 6 but may not meet that goal.

By Mercurynews.com

August 28, 2012:

Inquiry into Chevron's Richmond refinery fire could spark prosecution, regulatory reform  Dean said "a few" service stations have pumps with premium or midgrade gasoline unavailable until they can be tested. "We're very confident that 'regular' is in good shape now," he said, adding that regular-grade accounts for more than 80 percent of gasoline sold in the region. BP on Monday also provided some details about the source of the contamination, which arose when one feed of oil piped into a refining unit — called the alkylation unit, or alky — didn't have the correct molecular makeup and contaminated the resulting gasoline, Dean said. Using an alky is a secondary attempt in the refining process to convert more oil into gasoline using acid to rearrange molecules. Not all crude oil is converted to gasoline on the first pass through the refinery's distillation equipment. The eventual result from the alky is supposed to be a high-octane, clean-burning gasoline with anti-knock properties. But from Aug. 13 to Aug. 17, one of the feeds into the alky didn't have the correct properties. "We found and cut off the problem to the alkylation unit. One of the streams of feed it was getting was bad — it was not of the chemical composition we wanted," Dean said.

By the time the problem was discovered, the bad gasoline, with larger and more complex hydrocarbon molecules that don't burn well, had spread throughout BP distribution channels. Some was sold to motorists whose vehicles experienced such symptoms as hard-starting, stalling, rough idling and illumination of the check-engine light. In most cases, spark plugs and fuel injectors essentially became dirty and didn't work correctly. Repairs, which primarily consist of draining the fuel tank and cleaning the fuel system, cost $300 to $1,200.  Motorists who believe their vehicles have been damaged by the contaminated fuel can file a claim by calling BP's customer hotline at 800-333-3991 or 800-599-9040. Consumers can also access information and submit an online inquiry at bpresponse.com. Consumers should save sales receipts, credit or debit card records and repair bills, the company said.

By Chicago Tribune