Right before Ida visited us, Phillips Petroleum put their Alliance refinery up for sale. The refinery was flooded when the levee broke. Now there is a potential buyer who wants to use it as a port transfer point, not as a refinery. Fewer jobs but less pollution.

Houston-based Hilcorp is reportedly visiting the Phillips 66 Belle Chasse crude oil refinery this week as it mulls buying the site to convert it into an oil export terminal, according to Reuters.  Hilcorp, a privately-held independent oil and gas exploration business active in the U.S. Gulf of Mexico in addition to onshore in Louisiana, did not respond to requests for comment. Phillips 66 has been looking to sell its Alliance Refinery in Plaquemines Parish which employs more than 850 workers and contractors. In general, its contract with the local United Steelworkers union expires at year end. If the refinery is either shut down or converted into an oil terminal, it’s unlikely the company would need such a sizable workforce, said David Dismukes, executive director of the LSU Energy Center.  About a month ago, Phillips 66 said it was putting the refinery for sale “in response to market conditions and the evolving energy landscape.” “It just boils down to where the projected profit margins are, companies are having to rank order their assets,” Dismukes said. “These assets that go up on the market are less profitable.”

The industry, as a whole, is seeing a drop in sales. Profits are still good but Ford is shifting to all electric and renewable energy is gaining.

Some external factors in the market includes waning demand for gasoline because of competition from renewable fuels and electric vehicles. It’s unlikely that another major oil business may look to revive the refinery, since it’s not part of an integrated chemical complex, Dismukes said. The risk of shutting down entirely remains high since the reported suitor isn’t interested in the site for a refinery. “It’s a very real concern,” he said. “At some point I think you’re going to see more (refineries) shut down, which ones I don’t know.” The Belle Chasse refinery is one of two which remain shut down after Hurricane Ida. The refinery flooded with up to five feet of water when a levee was breached, according to Louisiana Department of Environmental Quality reports. Some oil was spilled into the water at the time and the facility was without power until the beginning of September.

Phillips is still thinking about the plant but repairs would be needed and contracts are getting near to renewable.

Phillips 66 said it is assessing the damage and planning to restart operations, though the facility will likely remain offline through October. Phillips 66 declined to comment about how extensive the repairs might be and regarding any visit from a potential buyer. The company did say the process to sell the refinery continues. The 2,400 acre Belle Chasse site has a capacity to process 255,600 barrels of crude oil each day, most of which is refined into gasoline. It was built in 1971. The refinery still has several active Industrial Tax Exemption Program contracts totaling $11.8 million of assessed value which means $824,710 in property tax breaks, according to the Plaquemines Parish tax assessor. The total assessed value of the property is more than $109.8 million and the company pays upward of $7.7 million each year in taxes.

Hilcorp is a familiar face in this area but not as a producer but more as a transporter of oil.

Hilcorp has been active in the Louisiana market since the 1990s and is operating across 29 parishes with more than 600 active wells. Hilcorp employs 300 employees and contractors in Louisiana with some work offshore. But the company does not own any crude oil refineries. The potential value of the sale could be $500 million, according to U.S. investment bank Tudor Pickering Holt which described the Alliance refinery as its least profitable in the Phillips 66 portfolio because of regional competition. In 2012, Phillips 66 considered selling the refinery and stalled a planned expansion there, but decided to keep it open. The plant is a significant economic driver in the region and many residents are retirees.  “It’s very important to the community, not only does it generate a great deal of tax dollars but they’ve been a great neighbor,” said Kirk Lepine, president of Plaquemines Parish. Hilcorp is already a major oil producer in Plaquemines. “It would be a win for us,” Lepine said. “Over the years it has changed names and ownership several times and it has continued as a refinery but whoever buys it now will have to make a decision.” Phillips 66, the fourth largest U.S. refiner, has a refinery in Westlake with a capacity of 264,000 barrels of oil each day.

Ida, COVID-19, Delta off shoot, and other factors have hit a lot of companies (and people) causing problems. The oil industry has not been immune.

The coronavirus pandemic and its related economic slowdown in the past year meant fewer travelers and commuters on the road which led refineries to feel the pinch. Some properties have been closed or put up for sale. Royal Dutch Shell attempted to sell its Convent refinery last year but decided to shutter the operation instead. Nearly 700 workers were laid off and hundreds more contractors were let go. In early September, LyondellBasell decided to put its 268,000 barrel per day refinery in Houston up for sale. Calcasieu Refining Company idled its operation in southwest Louisiana in advance of Hurricane Laura in 2020 and laid off nearly all its workers in 2020. The company is eyeing a restart. Phillips 66 has a dozen other refineries in its portfolio from New Jersey to California and Texas. The company is planning to convert its San Francisco refinery to produce 680 million gallons of renewable gasoline, diesel and jet fuel annually.

Phillips is being coy as suitors appear. My guess is that it will be sold and probably not used as a refinery. That will be both good and bad for the region and especially Belle Chasse.

The Alliance Refinery flooded right after it was put up for sale and now a potential buyer
Tagged on: