US midcon refiners brace for Canadian oil loss

OREANDA-NEWS. May 11, 2016. Midcontinent refiners will likely tap besotted crude storage and dust off Gulf coast pipelines to make up for Canadian crude supplies curtailed by wildfires.

Wildfires raging through Alberta, Canada, have displaced thousands from communities tied to oil sands development and shut in more than 1mn b/d of production. Refiners early this week did not yet know exactly how the disaster would affect crude shipments into the US midcontinent, which averaged 2.1mn b/d last year. But sources familiar with operations expected some kind of disruption and said companies were making plans for alternate supplies.

Shippers were asked to increase volumes on the 1.2mn b/d Capline pipeline connecting St James, Louisiana, to Patoka, Illinois. Nominations remained open and expected volumes had reached up to 600,000 b/d, or roughly double recent volumes, according to multiple sources.Capline operator Marathon Petroleum, which owns the line with BP and Plains All-American Pipeline, declined to comment on the shipping interest.

The pipeline has been frequently discussed to join a wave of reversals shifting flows from north to south as Canadian imports dried up interest in shipments from off the US Gulf coast. Historic midcontinent access to waterborne imports fell as refiners there benefited from a spot at the front of the lines for growing US and Canadian crude production.

In the wake of the fires those refiners may now turn to continued access to near-record volumes at the crude oil storage hub in Cushing, Oklahoma. Crude in Cushing storage has swollen to a record 67.5mn bl this year, and were last week at 66.3mn bl. Taking Cushing crudes would be a change in diet for refiners like BP, Marathon Petroleum and Phillips 66, which have all undertaken major expansions to their ability to process oil sands crude over the past five years.

Phillips 66 declined to comment on specific supply adjustments but said the company does expect reductions to its crude supply. The US independent refiner imported an average 200,000 b/d in 2015 for the 356,000 b/d Wood River refinery in Roxana, Illinois, it operates with Canadian integrated firm Cenovus.

BP declined to comment on potential impacts, but BP-Husky Toledo already planned to reduce rates for a (major turnaround)[http://direct.argusmedia.com/newsandanalysis/article/1225841] beginning in May and extending into June. Work on fluid catalytic cracking (FCC) and coking units will reduce refinery rates to less than a quarter of the facility's 157,000 b/d capacity, reducing supply concerns to the refinery.

BP two years ago completed modifications to its 410,000 b/d refinery in Whiting, Indiana, to run up to 280,000 b/d of heavy crude. But Whiting can still run at lower efficiency volumes of sour or light crudes retrieved from connections with the US crude storage hub at Cushing, Oklahoma.

Citgo, a significant Canadian customer at its 167,000 b/d refinery in Lemont, Illinois, did not expect any supply interruption. ExxonMobil, which averaged imports of Canadian heavy in 2015 equal to total capacity at its 240,000 b/d Joliet refinery in Channahon, Illinois, did not comment on its plans.