By David Bird
NEW YORK--A feared shortfall of gasoline and diesel fuel caused
by planned East Coast refinery closures has been mitigated by
industry moves to revitalize some off the plants and moves to
reconfigure and expand infrastructure in region, the federal Energy
Information Administration said Wednesday.
"The worst case scenario ... has not come to pass," the EIA said
in a report, referring to concerns in a February report of a
potential shortfall of 420,000 barrels a day of gasoline and
ultra-low sulfur diesel fuel in the region that would have resulted
in the idling of three Philadelphia-area refineries, with combined
capacity to process 700,000 barrels a day of oil.
The gap "is now expected to be just 50,000 barrels a day of ULSD
[diesel], with the gasoline gap disappearing almost entirely," the
EIA said.
The supply shortfall in diesel is largely because of the
expected increase in demand resulting from the move by the state of
New York to require ultra-low sulfur diesel fuel for use as home
heating oil, which went into effect July 1, well ahead of similar
moves by other states in the region.
Still, the EIA doesn't expect closing that gap to be a problem.
"Moving about 50,000 barrels a day of additional ULSD to the
Northeast should be well within the capacity of existing
infrastructure," the EIA said.
"While global ULSD markets remain tight, the U.S. Gulf Coast is
a major center of ULSD production, exporting an average of almost
580,000 barrels a day of ULSD" on average in the first four months
of the year, the EIA said. "Given the recent 55,000-barrels-a-day
expansion of the distillate segment of the southern portion of the
Colonial Pipeline, the ability to ship ULSD from the Gulf Coast has
increased by more than the updated estimate of additional supply
required from outside the region."
Still, the EIA said additional volumes of ULSD moving on the
northern portion of the Colonial pipeline could crowd out shipments
of other fuels such as gasoline until 2013, when Colonial is
expected to complete an expansion on the Greensboro-to-Linden
portion of the pipeline.
That could mean continued gasoline imports for the Northeast,
but "as gasoline is available in greater volumes globally,
importing additional barrels should not pose a challenge," the EIA
said.
The EIA noted the joint venture between The Carlyle Group and
Sunoco Inc. (SUN), which intends to keep the 335,000-barrels-a-day
Philadelphia refinery operating, and the Delta Air Lines Inc. (DAL)
deal to purchase the shuttled 185,000-barrels-a-day Trainer, Pa.,
refinery from ConocoPhillips (COP) and restart operations by
mid-September. The Carlyle-Sunoco deal will increase yields of ULSD
from the plant, EIA said.
"With these two refineries in operation, the supply of petroleum
products refined in the Northeast region is expected to be much
higher than in the scenario EIA considered in its February report,
greatly reducing the requirement for additional petroleum products
from outside the region," the EIA said.
The EIA said other developments, including increased product
flows into the region from the Midwest and increased capacity to
bring waterborne products into the product pipelines originating in
the Philadelphia area, have also contributed to the easing of
product supply concerns.
The region now has increased ability to bring in products to
pipelines that feed Pennsylvania and western New York as a result
of Sunoco Logistics' Eagle Point Terminal in New Jersey becoming
operational, the EIA said. "With a connection to the Colonial
Pipeline as well as dock capacity to bring in waterborne petroleum
products and move them on the pipelines running westward, Eagle
Point helps to create a more flexible infrastructure in the
region," EIA said.
"While the petroleum product supply picture in the Northeast has
definitely brightened, EIA's current analysis is based on projected
consumption from EIA's monthly forecasts. If consumption were to
deviate significantly from projected levels for any reason, supply
requirements would change accordingly. Global ULSD markets remain
tight, and attracting supplies to the Northeast means competing
with other demand centers, particularly Europe," the EIA said.
-Write to David Bird at david.bird@dowjones.com
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