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Every oil fuel refinery owner would agree that shutdowns, whether planned or unplanned can be extremely arduous and expensive. Millions of dollars are spent each year, or in every three to four years, depending on the size of the operation, in planning and implementing a refinery turnaround. There are vast issues to address, such as worker safety, equipment upgrades and immense labor demand, timescale, and the overall expense it takes to carry out the plans. While operators are torn between the need to balance turnaround frequency and cost versus equipment maintenance needs, not much effort is afforded to mitigating its impact on downstream customers.

On-Site Fuel Service Reducing Refinery Turnaround Impact on Buyers

Shutdown’s effect on pricing

Refineries generally aim for a shorter but safe shutdown. Considering the law of supply and demand, fuel shortage as a result of refinery plant shutdowns–no matter the timespan–can quickly boost the fuel price. Even though some refineries do take time to provide more supply to an affected region before a planned turnaround, there will still be significant impact on the overall supply and price. In fact, some suppliers would deliberately increase their prices to discourage excess buying and protect their inventory.

Additionally, even if the shutdown schedules are thoroughly calculated, realistically speaking, lots of unpredictable things can occur. From hurricanes to power outages and operational mishaps, there exists a possibility of unforeseen circumstances that may cause delay in turnaround operations which, needless to say, will spike up fuel prices on a prolonged period.

Customers to suffer

With a major supplier temporarily closed down and probably incapable of providing enough fuel to meet their needs, buyers down the chain would have to resort to other sources, leaving them with no choice but to put up with the higher pricing in order to continue operating; and that’s if there’s enough supply left for them.

So in what way can refineries alleviate this situation?

Refineries should ensure that they have a fail-proof network of reliable fuel sources and include this in their turnaround plans. Not only do suppliers like Apache Oil Company provide fuel necessary for turnaround continuity but they can also temporarily fill inventories while the operations are ongoing, for the benefit of buyers down the line. By having an on-site or, in the case of unplanned shutdowns, an emergency fuel provider, refineries can mask up production loss and demonstrate dependability to preserve business relationship amid a turnaround.

 

Source: Why Prices Historically Go Up in the Spring, NACS

Source: Faster, Safer, Cleaner: The Trends and Challenges in Plant Turnaround, Process Worldwide

Posted on Jul 8, 2015

About the Author

Kenny Isbell

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