U.S. refiners face severe labor shortage for deferred maintenance

Tue Jan 3, 2017 1:13pm EST
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By Jarrett Renshaw

(Reuters) - After years of running flat out, U.S. Gulf Coast refiners are lining up repairs to plants in 2017 - but facing a severe labor shortage that could delay work, drive up costs and raise accident risks.

Fuel producers such as Marathon Petroleum Corp (MPC.N: Quote) and Valero Energy Corp (VLO.N: Quote) have delayed routine work in the past 24 months amid high margins. Those margins collapsed this year in a global fuel supply glut, providing an incentive for refiners to undertake the shutdowns necessary for maintenance.

But refiners are now competing for pipe fitters and ironworkers with a host of billion-dollar energy projects, including Cheniere Energy's (LNG.A: Quote) liquefied natural gas export terminals and a new petrochemical unit for Dow Chemical (DOW.N: Quote).

Without undertaking the work they need, refineries run the risk of more unscheduled outages at plants. Plant shutdowns can disrupt fuel supplies and are closely tracked by oil traders because they directly affect demand for crude and supply of fuel.

"Putting off work definitely affects the safety of the refinery," said Ed Lee, an independent refinery safety consultant who worked at Royal Dutch Shell (RDSa.L: Quote) for three decades.

Refiners can mitigate the risks - but at a cost, by slowing output or avoiding types of crude that are difficult to process, Less said.

In recent months, a spate of unexpected outages have hit refineries nationwide, taking hundreds of thousands of barrels off the market and boosting gasoline prices and margins.

U.S. refiners are expected to spend $1.26 billion on planned maintenance next year, up 38 percent from this year and the highest level since at least 2010, according to Industrial Information Resources (IIR), which tracks labor supply for refiners and other industrial companies.   Continued...

FILE PHOTO - Refinery workers walk inside the LyondellBasell oil refinery in Houston, Texas March 6, 2013. REUTERS/Donna Carson/File Photo