October 31, 2013 / 8:54 PM / in 4 years

UPDATE 1-PBF increasing crude rail shipments on higher U.S. oil prices

* Company expanding offloading capability for railed crude

* Had cut rail shipments in 3Q on lower oil prices; ramping back up

* Delayed Canadian crude offloading expansion

By Kristen Hays

HOUSTON, Oct 31 (Reuters) - Independent U.S. refiner PBF Energy Inc is expanding crude-by-rail offloading infrastructure at its Delaware refinery to receive more North Dakota Bakken crude than it can process, executives told analysts on Thursday.

The 182,200 barrels-per-day Delaware City refinery can unload about 100,000 bpd of Bakken light crude delivered via rail. The $10 million expansion of offloading capacity, to be finished by May 2014, would increase that to about 125,000 bpd.

PBF Chairman Tom O‘Malley said in a conference call with analysts that the Delaware plant can run up to 100,000 bpd of Bakken crude, but the rest could be barged to the company’s 160,000 bpd refinery in Paulsboro, New Jersey.

O‘Malley said the Paulsboro plant already takes some barge-delivered light crude from other East Coast terminals, but sourcing it from its sister plant in Delaware is “a much more economic move than taking it from third parties.”

O‘Malley discussed the expansion while on the call about the company’s third-quarter earnings, which showed a net loss on higher U.S. crude prices, more expensive feedstocks and high costs of ethanol credits.

“Trying to find something good to say about the third quarter in our industry in the United States or in PBF is something similar to putting lipstick on a pig. It just was an ugly quarter,” O‘Malley said.

Costs for both U.S. crude and ethanol credits have since fallen, potentially improving profitability for PBF and other refiners.

RAIL OFFLOADING EXPANSION

PBF is making the expansion after sharply reduced rail shipments of Bakken crude during the third quarter when U.S. crude prices rose, eroding discounts to London’s Brent and other global crude that squashed the cost benefit of replacing railed-in crude for imports.

A double-digit discount to global crudes makes running the cheaper U.S. crudes profitable even with added costs of rail. That discount all but disappeared during the third quarter, but since widened again, ending Thursday’s trading session at $12.46.

Chief Executive Tom Nimbley told analysts that PBF brought in 60,000 barrels per day of sweet crude and 35,000 bpd of Canadian heavy crude to the Delaware City plant in the third quarter. The company took more imports instead, having lost the cost benefit of running railed North American crude.

Bakken rail shipments are ramping back up, however, and the company expects to run up to 90,000 bpd in the fourth quarter “as the economics have greatly improved over the last few weeks,” Nimbley said.

Canadian heavy deliveries will range from 20,000 bpd to 25,000 bpd in the fourth quarter, lower than in the previous quarter because of planned work on the Delaware plant’s coker. The work is expected to finish within two weeks, he said.

Also, PBF has delayed an expansion of its rail offloading capacity for Canadian heavy crude to 80,000 bpd from 40,000 bpd to the second quarter of 2014 from the fourth quarter this year because of delays in the buildout of loading infrastructure in Canada, Nimbley said.

“Depending on developments in Canada, PBF projects doubling of our heavy crude unloading capacity could be advanced or further delayed as needed,” he said.

Nimbley also said that a 20-day turnaround at the Paulsboro refinery was pushed to the end of the first quarter of 2014 from the fourth quarter this year in conjunction with the delay in expanding the heavy crude unloading infrastructure.

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