US oil refineries rely on automation amid largest strike since 1980

Houston

THE heart and soul of a modern refinery isn't the welders and pipefitters with grease on their hands; it's the white-collar technicians seated at computers in a control room, overseeing the flow and temperature of every tank and valve.

That's why a workers' strike that began in nine US refineries on Sunday won't have much effect on fuel production at the plants. It probably will hurt refiners even less than the last strike 35 years ago, which also had a negligible impact on operations, according to industry analysts and consultants.

"Refineries are highly automated operations that should be able to run with minimal disruption in the initial days and weeks," Roger Read, an analyst for Wells Fargo Securities, said on Monday in a note to investors. "Strikes are not new to the industry and a combination of non-union management and contract workers will be called in to maintain operations."

The United Steelworkers, a union representing employees at more than 200 refineries, terminals, pipelines and chemical plants, stopped work at nine sites after failing to agree on terms for renewal of a labour contract. The nine plants account for 10 per cent of US refining capacity.

The union is seeking to capture some of the cash windfall that refiners have reaped as shale drilling pushed US oil production to the highest level in more than two decades. United Steelworkers has rejected five offers made by Royal Dutch Shell plc on behalf of companies including Exxon Mobil Corp and Chevron Corp since talks began on Jan 21, the union said.

"This is one of the richest industries in the world," United Steelworkers chief executive officer Leo Gerard said. "Refineries process raw crude and convert it into fuel. The reality is the price of crude has dropped, and this is boom time for them."

If no agreement is reached, the union is considering expanding the strike to include more refineries. "We took three different companies in three different regions of the country to give them the signal that our members aren't happy with the way things have gone, but that we're continuing to be at the bargaining table, and we're willing to negotiate a settlement."

"There's no guarantee that, if we can't get back to bargaining, we won't increase the number of refineries" on strike, he said.

The biggest worker strike to hit the industry since 1980 isn't expected to immediately hurt production, since refineries develop contingency plans using engineers and non-union workers to keep plants running. In 1980, during the last set of major strikes at US oil processing plants, production of petrol and diesel was not significantly affected, said John Auers, executive vice-president at Turner Mason & Co, a Dallas-based energy consultancy.

Advancements at refineries have changed the way that workers activate units and move fuel through the complexes. Instead of walking to a tank or pipeline to check a gauge or turn a valve, more than a dozen workers at computers monitor the operation from a central control room. From there they can check inflows and outflows of oil and gas and complex chemical processes, such as those used to reduce the sulphur content in petroleum products.

They can watch as oil comes into the plant through a train or pipeline, and then goes through an initial separation, usually in what's called a distillation tower or splitter. From there they can review temperatures and pressures and make slight adjustments as the hydrocarbons are heated or cooled. Employees monitor two to four screens, working in shifts of eight to 12 hours to keep tabs on all the processes.

"They're more automated now than in the 1980s," Mr Auers said. "I have every confidence that things will go relatively smoothly. Operators may not push their plants as hard in this environment, but they can keep them running without too much difficulty. I don't think there will be a problem."

Switching to non-union staff may not be as easy for refineries as it sounds, said David Jones, a union pipefitter at Marathon Petroleum Corp's refinery in Texas City who was on strike. Mr Jones said that many of the supervisors have little experience working the processors and other complex machinery at the plant. That doesn't bode well for production if the strike drags on, he said. "I wouldn't be surprised if the place isn't running in a couple of weeks," Mr Jones said. "Its a very complicated facility. It's not like getting in a car and driving away."

Oil fell as much as 3.3 per cent in New York on Monday amid speculation that the strike might curtail crude processing in the world's leading consumer nation, worsening a global oversupply.

The only plant shutting down so far is a California refinery owned by Tesoro Corp that already was scheduled for maintenance downtime.

Using non-union workers and engineers to keep the plants running was part of regular practice during several strikes that took place in the late 1970s and 1980s, Mr Auers said. BLOOMBERG