Houston, 30 April (Argus) — A wholly-owned subsidiary of US airline Delta has reached an agreement to acquire ConocoPhillips' 185,000 b/d refinery in Trainer, Pennsylvania, which had been slated for shut down this summer if a buyer was not found.
The carrier will receive $30mn in assistance from the state government toward the $150mn purchase by its subsidiary, Monroe Energy. Delta plans through the subsidiary to spend $100mn more to further tilt the refinery toward jet fuel production at a refinery not far from three major northeast hubs for the airline.
Delta expects production from the refinery, combined with multi-year agreements exchanging gasoline, distillate and other products for jet fuel, to provide 80pc of the company's US jet fuel demand after the purchase closes in the first half of 2012.
“Acquiring the Trainer refinery is an innovative approach to managing our largest expense,” Delta chief executive Richard Anderson said today. “This modest investment, the equivalent of the list price of a new widebody aircraft, will allow Delta to reduce its fuel expense by $300mn annually and ensure jet fuel availability in the northeast.”
Of the three refineries put on the block since last fall, the Trainer refinery seemed the least likely to find a suitor. A local union representative glumly reported in January that company officials were prepared to tear the entire refinery down. ConocoPhillips abruptly idled the facility last October and shut the refinery down completely in February, citing years of losses. A diet of expensive imported sweet crude appeared to cripple the refinery's viability. Trainer imported 53pc of its crude in September from Nigeria, 21pc from Congo and another 18pc from Angola. Just 8pc of the crude imported that month came from a non-African source, Canada.
It was a surprise in March when a potential bidder appeared, and more shocking still when rumors slipped out of who might be interested – a US airline. Delta moved aggressively last year to counter costly jet fuel that has eroded profits for it and other carriers.
The Trainer refinery was one of the few in the region to report charge rates associated with jet fuel, and of those, reported the largest volume, at 23,300 b/d. PBF Energy reported 16,500 b/d of jet fuel-related capacity at its 160,000 b/d refinery in Delaware City, Delaware, in the latest government data, and United Refining's 65,000 b/d Warren refinery, in western Pennsylvania, had 5,000 b/d, according to the same report.
Sunoco's nearby 330,000 b/d Philadelphia refinery describes a catch-all “other distillate” output of 163,000 b/d.
BP will supply crude to the Trainer facility under a three-year agreement. Monroe Energy will exchange gasoline and other refined products from the refinery for jet fuel from Phillips 66 and BP, according to the agreement.
Delta expects to recover its investment in the first year of operations, the company said.
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