- A fire that broke in one of the oldest and largest oil refineries serving the US east coast has affected product tanker trades.
- The fire has reduced the need for crude oil being shipped by pipeline and train to the refinery and is closed for overseas imports.
- There are talks to replace Philadelphia Energy Solutions refinery output with an alternate supplier and may need to import up to 30% more products.
According to an article published in Tanker Shipping and Trade, 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.
Product tanker trade impacted
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 is both relatively expensive options and is 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.”
Supply of crude oil reduced
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.
Output to be replaced
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.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!