PES Refinery Expected to Shut Remaining Units as Crude Dwindles

The Philadelphia Energy Solutions refinery, the oldest and largest on the U.S. East Coast, is expected to shut its remaining units on Monday as the plant uses up the last of its crude supplies, sources said on Wednesday. The refinery is still weighing the economics of running more crude oil to keep the units active for an extended period, the sources said.

Crude shipments destined for PES have been diverted in the weeks after the June 21 fire and explosion at the 335,000-barrel-per-day refinery, according to data and trade sources. The fire, which started in an alkylation unit in the Girard Point section of the Philadelphia complex caused PES to begin closing the facility without an intended restart.  Roughly 1,000 workers are expected to be laid off and contractors who do business with the refinery will also be affected by the shutdown.

PES, which emerged from bankruptcy last year, has multiple owners, including investment bank Credit Suisse and investment firm Bardin Hill. Refinery officials were not immediately available for comment. PES has long been a steady buyer of imported crude oil, particularly from West Africa. Its loss as a buyer threatens to shrink the last steady U.S. market for West African crude.

Last year, U.S. refiners imported 180.7 million barrels of crude oil from Africa, according to U.S. Energy Information Administration figures. The PES refinery imported 43.1 million barrels from Africa in 2018, second only to the Phillips 66 refinery in Linden, New Jersey among U.S. refineries. A cargo with 1 million barrels of Nigerian crude oil chartered by the PES refinery was rerouted on Wednesday to Point Tupper, Nova Scotia, a crude oil storage hub in Canada, according to data intelligence firm Kpler.

Another cargo chartered by PES carrying 1 million barrels has been sitting idle in the waters near the refinery for about two weeks, Kpler data shows. Three additional crude ships originally bound for Philadelphia are discharging or recently unloaded, at the Monroe Energy refinery, owned by Delta Airlines Inc, in Trainer, Pennsylvania, data from Refinitiv Eikon showed.

“Delta has bought some cargoes,” a foreign buyer of West African crude said, noting the refinery had extracted heavy discounts for the crude originally bound for PES.

It was not clear how much of the cargoes were initially destined for PES as opposed to other refineries in the area.

As of last week, PES had roughly 3 million barrels of crude in storage, sources said. That supply has since largely been processed after PES restarted a larger crude unit at the Point Breeze section of the plant. With a small number of East Coast refineries compared with the U.S. Gulf Coast, PES has been left with few options to trade away the barrels without taking a financial hit, one U.S. source familiar with the situation said.

PES could sell the barrels to a nearby refinery, but those plants have typically already secured supplies for a further three weeks to a month, the source said, meaning vessels would have to wait for weeks before being offloaded.

(Reporting by Laila Kearney in New York and Jarrett Renshaw; Editing by Jonathan Oatis and Peter Cooney)