Delaware City oil train deliveries slow
Western wildfires and shifting oil markets have drastically trimmed the number of oil train cars coming into the Delaware City Refinery, company officials said Thursday.
An average of 60,000 barrels arrived by train each day at the facility between April 1 and June 30, down from an average of 125,000 daily barrels for the first three months of the year.
The oil comes from fields in North Dakota, Canada and other areas. Norfolk Southern Corp. delivers Delaware City crude in roughly 100-car “unit” trains that sometimes slow traffic at points around New Castle, Bear and near Newark. Before 2012, virtually all of Delaware City’s oil arrived by tanker from other countries.
Tom Nimbley, chief executive officer of plant owner PBF Energy Inc., in a second-quarter earnings conference call with investors Thursday, said rail-delivered North American crudes are too expensive compared with other sources that can be shipped in by water.
“Factoring in transportation costs, it is plainly evident that these [Midwestern and Canadian] barrels cannot find an economic home on the East Coast, or a lot of other places” at current levels, Nimbley said.
Rail deliveries could fall to 45,000 to 50,000 barrels per day in the third quarter before beginning a rebound toward the end of the year, Nimbley said.
“We buy our crude basically two to three months early, so the crude we’re running in the third quarter is based on prices that exist in the second quarter, and those prices did not support rail economics,” Nimbley said.
Gains on operations at Delaware City, meanwhile, could jump by another $70 million to $90 million a year by the second half of 2017, when a planned $100 million project needed to increase production of ultra-low sulfur products is completed, he said. Company officials have said a third party might build and operate a key part of the project, but have not released details.
“We feel that the East Coast is proving itself to be a consistent and reliable earner for the company and that our results reflect its valuable contribution,” Nimbley said.
Despite the transportation issues, company adjusted earnings totaled $80.5 million for the second quarter, above the $34.2 million mark for the same period in 2014. Much of the 2015 result was attributed to strong performances by PBF’s Delaware City and Paulsboro, New Jersey, operations.
PBF recently announced an agreement to purchase a fourth refinery near New Orleans for $322 million, in a deal that would increase the company’s total crude oil refining capability to about 725,000 barrels per day.
Delaware City was the company’s first refinery. PBF acquired the shut-down plant at a deeply discounted $220 million with state assistance. Previous owner Valero Energy announced plans to dismantle the facility in 2009 after writing off about $1.4 billion.
Contact Jeff Montgomery at (302) 463-3344 or jmontgomery@delawareonline.com.