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HOUSTON (Reuters) - Oil refiner Delek U.S. Holdings Inc is ramping up capabilities to receive crude oil via rail at its Arkansas refinery, both to increase access to cheaper oil and to compensate for the lengthy outage of a supplier pipeline, executives told analysts on Wednesday.
Introducing rail deliveries allowed the company's 83,000 barrels-per-day (bpd) refinery in El Dorado, Arkansas, to operate at 64,000 bpd in the second quarter and 70,000 bpd last month despite Exxon Mobil Corp's shutdown of its North Line pipeline in late April because of rupture that allowed more than 1,800 barrels of crude to leak.
The move also widened El Dorado's crude slate to increase access to lower priced U.S. inland and Canadian heavy crude, backing out more expensive Gulf Coast crude, CEO Uzi Yemin told analysts during Delek's second-quarter earnings conference call.
"Obviously we don't want to lose the capability of moving Gulf Coast crude if it becomes cheaper, but we will have the flexibility to have all these crudes coming outside the Gulf Coast earlier and still fill up the refinery," he said.
Average throughput for both the Arkansas and 60,000 bpd refinery in Tyler, Texas, was about 127,000 bpd in the quarter, Yemin said. A power outage at the Tyler plant in early May forced it to run at reduced rates for three weeks.
In May and June, the El Dorado refinery received about 2,000 bpd of lower priced crude by rail from North Dakota's Bakken shale oil play, Canada, the Eagle Ford shale in Texas and the Cushing, Oklahoma, delivery point for U.S. crude oil futures.
This month, those deliveries ramped up to 9,000 bpd, and can increase further to 15,000 bpd, Yemin said. The company also plans to add another 10,000 bpd of incoming heavy crude via rail in early 2013 with a new unloading facility at the El Dorado plant.
"We believe that our improved access to crude in El Dorado will allow us to reduce dependency on Gulf Coast crude and provide us with access to more economical types of crude at this refinery," Yemin said.
An Exxon spokeswoman said analysis of the shut part of the North Line pipeline near Torbert, Louisiana, is ongoing as the company works with regulators on the assessment and restart considerations.
Yemin also told analysts that the El Dorado refinery is slated for a pair of projects to increase diesel fuel production and optimize operations of the gasoline-making fluid catalytic cracking unit.
A $3 million upgrade, the first phase of which is slated to wrap up at year-end, will increase the diesel production capability to 34,000 bpd from 30,000 bpd, he said.
The second project, also $3 million, will involve replacement of an alkylation unit compressor and is slated to be finished by the first quarter of 2013.
Delek's earnings, released late Wednesday, showed a net quarterly profit of $67.8 million, or $1.15 per share, compared to 62.1 million, or $1.08 per share in the second quarter of 2011.
Delek shares rose 9.6 percent to $23.87 on Wednesday on the New York Stock Exchange.
Reporting By Kristen Hays; Editing by Marguerita Choy and Bob Burgdorfer