Unplanned outages at North American refineries hit five-year high: data

[BENGALURU] Refineries in the United States, Canada and Mexico last year experienced some 2,000 unplanned outages that affected production, more than quadruple the number in 2015, according to data analysed by Reuters.

Though US oil and gas production has soared to record levels, unplanned refinery outages due to mechanical failures can weigh on utilisation rates and raise costs for an industry built on slim margins. Unions have pushed for stricter fatigue standards that address safety on long-running maintenance projects.

Wall Street has been cutting estimates for refiners, citing higher downstime at refineries. Tudor, Pickering, Holt & Co cut its fourth quarter refining estimates by an average of 13 per cent as planned and unplanned outages may prevent companies from "taking full advantage of the appealing crack spread environment."

The refineries suffered 2,091 unplanned events affecting crude processing in 2019, according to Industrial Info Resources (IIR), which tracks interruptions. These events are equipment outages not part of a company's scheduled maintenance. IIR said there also were 304 planned interruptions last year.

North America had the highest number of unplanned refinery events in the world last year, according to IIR, above the 1,806 in South America, which had second most worldwide. The United States has about 134 operating refineries, while Canada has 14 and Mexico has six, according to government data.

The increased outages came as US refiners were gearing up to process more low-sulfur fuels. These fuels are in high demand due to a mandate by the International Maritime Organization (IMO) requiring ships without emissions scrubbers to use fuels with a sulfur content below 0.5 per cent, compared to 3.5 per cent previously.

"Complex refineries that have access to cheaper domestic crude have had every incentive from a margin perspective to run plants at full speed," said Sandy Fielden, energy analyst at financial services firm Morningstar.

US refineries' utilisation rate hit 93.1 per cent in 2018 from 88.3 per cent five years earlier, according to the US Energy Information Administration (EIA). Its 2019 data is not yet available, but investment advisers Tudor Pickering Holt & Co. estimated the rate fell to 88 per cent in the fourth quarter.

US gross inputs to refineries averaged 17.3 million barrels per day (bpd) last year, according to EIA weekly figures, though throughput was lower at 16.6 million bpd.

"The fact that there was less throughput last year but more incidents could be because so many refineries were down," Mr Fielden said.

Unplanned events can be dangerous for refinery workers.

"Some companies are not as strict about safety," said Ed Lee, a Salt Lake City refinery safety consultant who worked at Royal Dutch Shell for nearly three decades.

More than 10 North American refineries have changed owners in the past five years, contributing to turnover, he said.

"The loss of experience in the workforce is really hurting plants," said Mr Lee.

REUTERS