As Houston Recovers From Harvey, Getting Fuel Flowing Again Is a Slow Process

Oil refineries here are starting to come back online as the epicenter of the U.S. energy industry begins to recover from Hurricane Harvey. But getting the fuel flowing again isn't as easy as flipping a switch, and some key transport infrastructure remains down.

When Harvey inundated the Texas coast last month, it closed about 25% of U.S. refining capacity. Six Gulf Coast refineries, accounting for 9% of U.S. refining capacity, remained closed as of Tuesday afternoon, according to the Energy Department. Another five were in the process of restarting, and at least seven were running at reduced rates.

Saudi Arabian Oil Co. said Tuesday it was in the initial phases of restarting its Motiva refinery, the country's largest. But it said that the Port Arthur, Texas, facility, which can make 600,000 barrels of fuel a day, may be running at just 40% of capacity by the end of this weekend. And Exxon Mobil Corp. said over the weekend it was working toward restarting its Baytown refinery, the nation's second-largest.

Gasoline prices have jumped in the past week. Nationwide, the average gasoline price was $2.65 a gallon Tuesday, 30.2 cents higher than a month ago, according to AAA. At the same time, gasoline futures fell Tuesday as news emerged that fuel facilities were coming back online.

At LyondellBasell Industries NV, Chief Executive Bhavesh V. Patel left work before the hurricane made landfall on Aug. 25 confident that his company had done all it could to prepare its Houston refinery for the storm.

Operators at the 268,000-barrel-a-day facility knew the greatest threat was flooding, and had spent the week draining water from the site's dykes and retention pools and inspecting pumps and electrical infrastructure. Their goal was to avoid a complete shutdown and a potentially dangerous start-up.

Then, 50 inches of rain fell.

LyondellBasell's Houston refinery did continue running throughout the storm, one of a handful in the area to do so. But the company had to cut back production, mainly because it couldn't get in enough shipments of crude oil or find a way to move out its shipments of refined fuel.

Flooding caused the closure of the Houston Ship Channel, which enables tankers laden with crude to move from the Gulf of Mexico to area refineries. LyondellBasell continued to receive shipments from Canada via pipeline, but not enough to operate at full capacity.

At the other end, LyondellBasell also couldn't move its refined fuel product through the ship channel, creating the risk of running out of storage space. Outages on the Colonial Pipeline, which transports gasoline from the Gulf to New York, exacerbated storage woes, officials said.

"Not only are you trying to conserve what you're consuming to keep this thing running, but you also don't want to fill up your storage of products and have no way out," Mr. Patel said.

The goal was to stretch out supplies and storage space enough to keep the refinery running, even if barely. A complete restart of a refinery can take weeks and poses serious risks. The primary danger is human error -- starting back up often requires hundreds of new workers to come in and perform tasks outside ordinary operations. In 2005, 15 workers were killed during a start-up at a Texas City refinery, at the time owned by BP PLC, when a vapor cloud ignited.

At LyondellBasell's Houston refinery, which primarily processes heavy crude, workers are now in a pre-startup phase, checking electrical systems, pressure levels, steam supply, flaring and instrumentation. But fully resuming normal operations will require Houston's infrastructure to be up and running. Company officials declined to say how long that will take.

The ship channel is now open but not at full capacity. Rail networks remain hampered, and pipelines are still not running at normal levels.

LyondellBasell's employees are also in recovery mode. Some 100 employees out of a total of 850 at the Houston refinery were affected by the storm. Sixteen lost everything, company officials said.

The company found hotels for employees who lost their homes, set up a relief fund for employees and is giving paid time off for those affected by the storm to work on their homes. The company operates nine sites along the Gulf of Mexico, and more than 5,000 of its employees were in the storm's path.

Most employees at the company's operations on the Gulf were sent home ahead of the storm. Plants were staffed by so-called ride-out crews, who spent five days working 12-hour shifts, sleeping on cots in between.

Mr. Patel worked around the clock from his West Houston home, listening to operations briefings while monitoring the water levels of two reservoirs that flooded neighborhoods near his home.

All but the company's chemical complex in Matagorda, Texas, where the Brazos River caused severe flooding, managed to continue operating.

Mr. Patel said that Houston and the oil-and-gas industry need to think about infrastructure and the resilience of logistics facilities long-term. The city has had a major flood annually for the last three years and needs to prepare itself for more, he said, adding, "We've got to think about these events more seriously, about being able to handle them."

--Dan Molinksi contributed to this article.

(END) Dow Jones Newswires

September 06, 2017 07:14 ET (11:14 GMT)