The fire at the Philadelphia Energy Solutions refinery could increase oil product imports into the US east coast
On the morning of 21 June, a large fire broke out at the Philadelphia Energy Solutions refinery, one of the oldest and largest oil refineries serving the US east coast.
The fire raged for three days and the loss of petroleum product production will have an impact on the product tanker trades, according to Poten & Partners senior analyst Erik Broekhuizen.
He noted that “As there are no crude oil pipelines to these refineries, US crude needs to be supplied by Jones Act tankers or by rail, which are both relatively expensive options and are only cost effective if there is a large discount for domestic crude oil.”
“Petroleum products are supplied to the northeastern market through a combination of local production, imports from the US Gulf (mainly via the Colonial Pipeline) and imports from foreign refineries, mainly in Canada and Europe.”
The fire will reduce the need for crude oil being shipped by pipeline and train to the refinery and shut the door on any overseas imports, although it is not clear if force majeure has been declared.
On the oil product side, in 2018 the region served by the Philadelphia Energy Solutions refinery consumed 5.8M barrels per day (b/d) of petroleum products – 3.8M b/d of gasoline, 1.3M b/d of distillates and 0.4M b/d of LPG – figures from Poten via US Energy Statistics.
The Philadelphia Energy Solutions refinery output will need to be replaced, and Poten projected the region may need to import up to 30% more products and “much of the additional imports will come from further away, mainly Europe and from the Middle East and India”.
Intra-US oil product movements will have to be shipped by US Jones Act tankers unless a waiver is granted, or by long-haul imports depicted by Poten, with the latter likely to boost product tanker tonne-mile demand during an already extraordinary period in the run-up IMO 2020.
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