Cutbacks continue at two oil refineries over Texas petrochemical disaster

Lyondell Basell Industries may keep production cuts at its 263,776 barrel-per-day (bpd) Houston refinery for a week because of shipping disruptions in a key oil port from a chemical spill, Gulf Coast market sources said on Friday.

Royal Shell Plc plans to increase production on April 3 at its 275,000 bpd joint-venture Deer Park, Texas, refinery, which was cut because of the shipping shutdown, the sources said.

Lyondell cut production by at least 14 percent following the shutdown of the upper Houston Ship Channel last week after a chemical spill on March 22 from Mitsui & Co’s Intercontinental Terminals Deer Park facility.

Lyondell spokeswoman Chevalier Gray said on Friday the company was contending with constrained barge and ship traffic.

The Deer Park refinery, which is a 50-50 venture of Shell and Mexico’s national oil company Pemex, shut a vacuum distillation unit.

On Wednesday, ships began moving though the area of the channel contaminated by the spill.

A crude oil tanker reached the Deer Park refinery on Wednesday, staving off a temporary shutdown because of a dwindling on-site crude supply.

Shell spokesman Ray Fisher declined comment.

The Lyondell refinery has been receiving crude from a pipeline originating at the Texas City, Texas, terminal at the southern end of the channel, which is not affected by the spill, the sources said.

Production was cut at the Lyondell refinery because barges could not haul away sulfur produced in the making of motor fuels.

Though barges began carting away sulfur on Wednesday, Lyondell wants to be sure it receives an adequate supply of the caustic chemicals needed to prevent the heavy, sour crude it processes from fouling distillation units, the sources said.

The Coast Guard, which oversees channel ship traffic, was aiming to increase the number of ships moving through the contaminated area, said Captain Kevin Oditt on Friday.

The Coast Guard hopes to move 49 vessels in and 18 ships out of the upper channel, Oditt said. Twenty-three ships, or about 50 percent of what usually transits the upper channel, moved through on Thursday.

Some adjacent areas of the waterway, which connects the Port of Houston to the Gulf of Mexico, remain closed, trapping more than 100 barges.

The Intercontinental Terminals Deer Park facility was the site of a massive fire last week in which 11 storage tanks containing gasoline blending stocks burned. The chemicals that spilled were released by the blaze.

(Reporting by Erwin Seba; additional reporting by Gary McWilliams; Editing by Diane Craft and Rosalba O'Brien)