Citgo crude unit listing, damaged after fire

By Barbara Powell
Bloomberg News

Citgo Petroleum Corp.’s only crude unit at its refinery in Lemont, Illinois, is listing and initial assessments indicate it may have sustained extensive damage in a fire Oct. 23, said two people familiar with plant operations.

The fluid catalytic cracker and one side of the coker are shut, said the people, who asked not to be identified because the information isn’t public. The alkylation unit is operating while output at other downstream units, including hydrotreaters, is reduced, they said. The refinery provides gasoline and diesel to Chicago and the upper Midwest.

“The Lemont refinery is a significant supplier of both gasoline and diesel fuel into the Chicago market,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “A lengthy shutdown would require supplies being made up by Gulf Coast refineries.”

The crude unit, whose capacity matches that of the 170,500- barrel-a-day refinery, is visibly leaning, the people said. The Oct. 23 fire occurred while a malfunctioning pump was being replaced, the people said. A report filed with the National Response Center dated Oct. 24 said there was a spill of vacuum tar bottom, a raw material used in making bitumen.

Gasoline futures jumped 1.5 percent yesterday from a 16- month low on the New York Mercantile Exchange. Chicago wholesale gasoline gained the most in two months. The company’s website said Lemont processes mostly crude from Canada. Canadian heavy crude yesterday weakened to its widest discount to the U.S. benchmark in almost three weeks.

Chicago Market

Western Canadian Select traded at a $33.50 discount against West Texas Intermediate, compared with a $31.75 discount Oct. 23, according to data from Calgary oil broker Net Energy Inc.

“Given it processes a significant amount of heavy Canadian crude, a lengthy outage would depress prices across Canada as inventories build and producers seek alternative outlets,” Lipow said.

The crude unit was damaged in another fire in August 2001. The refinery was subsequently shut until June 2002. The U.S. Environmental Protection Agency temporarily relaxed clean-air standards for gasoline supplied by Lemont to help Citgo supply fuel to its distributors. The waiver allowed Lemont to blend feedstocks from other area refineries.

Fernando Garay, a spokesman for Citgo in Houston, said yesterday in an e-mail that refinery operations have been “significantly reduced” while some downstream units were operating. He said the company didn’t have a schedule for when the crude unit would be operational. He has not issued an update today and did not immediately respond to an e-mail seeking comment on refinery operations.

Futures Discount

Conventional gasoline to be blended with ethanol, or CBOB, in Chicago traded at a 13.5 cent discount to New York futures as of 2:42 p.m. New York time today, narrowing from a 24.5-cent discount two days ago, according to data compiled by Bloomberg. Ultra-low sulfur diesel traded at a 6.75 cent discount, compared with a discount of 9.5 cents on Oct. 23.

Inventories of gasoline in the Midwest rose 0.5 percent last week to 49.7 million barrels, 0.3 percent above the five- year average, according to Energy Information Administration. Supplies in the Gulf Coast were at a five-month low.

Citgo is the Houston-based unit of Petroleos de Venezuela SA, Venezuela’s state-owned oil company.