Events Calendar
In This Section
Most Read Stories
Man robbed at Tallmadge Avenue eatery
Another winter punch heading toward Ohio
Four teens restrain man, take items from his Akron home
Complaints against officer keep coming
Police: Ohio girl dies after fall into snow bank
Region makes way for latest batch of snow; cancellations rise
Cuyahoga Falls residents come home to find burning couch on balcony
Blogs:
First Bell - On Education:
No City of Akron basketball tonight
Pets:
Pet telethon re-airs
The Heldenfiles:
Chipmunks "Squeakquel" on DVD/BD March 30
Akron Zips:
Late surge gives Zips ugly road win
Tribe Matters:
Blogmail response on Hafner
Cleveland Browns:
Stallworth's contract terminated
Balanced Ledger:
QB in Browns future: another mock draft
Kent State Sports:
KSU Notes – February 9
Cleveland Cavaliers:
NBA Power Rankings from Around the Internet
Buckeye Blogging:
Buckeyes grab 18 players on signing day
Varsity Letters:
Garfield at Buchtel basketball
All Da King's Men:
Palin At The Tea Party Convention
Blog of Mass Destruction:
Republican Pre-Conditions
Akron Law Café:
Law, Love and Chocolate
Car Chase:
Collector Car Hobby Loses One of the Best—Jim Roll
Let's Talk Real Estate:
Decisions Decisions: Credit Cards or Your Mortgage?
Ohio Travels with Betty:
Loucile is looking for a Lake Erie getaway in June for three kids, ages 1, 3, and 5.
Sound Check:
Talk of the Town – Top entertainment picks for the weekend
HRLite House:
OFCCP Report
Akron Gamer:
Makers of 'Castle Crashers' unveil 'BattleBlock Theater'
See Jane Style:
Do IT this week: Layering
Refiner, marketer tries many strategies to cut risk, remain in black
By Henry J. Holcomb
Philadelphia Inquirer
Published on Sunday, Jan 06, 2008
Like motorists, Sunoco Inc. worries when crude oil prices soar, as they did in 2007.
The Philadelphia company, which dates to the 19th century, long ago sold its oil exploration and production businesses. So it pays for the crude delivered to its refineries, by ship or pipeline, and feels financial pain when there's a lag between a rise in crude and the market price at the pump.
2007 was ''perhaps one of the most volatile years I've seen,'' said John G. Drosdick, 64, Sunoco's chief executive and chairman since 2000.
The refiner and marketer has tried to ride out the turbulence by taking over competitors, reducing unscheduled shutdowns with major upgrades at its Philadelphia facilities, and diversifying into chemicals. Those moves, along with the tight refining capacity nationwide, have enabled it to stay in the black even as crude prices edged toward $100 a barrel.
It's been a tough ride recently. In its third-quarter results, Sunoco said net income fell 38 percent from the same period a year ago. For the nine months ending Sept. 30, its earnings were up 5 percent compared with leaps of 25 percent and 61 percent in previous years.
Refining, on balance, has been good for Sunoco. For 30 years, Sunoco and other refiners had to jostle for advantage because of too much capacity.
That's no longer true.
The United States now burns an average of 1.5 million barrels more fuel daily than it can refine, which means Sunoco can sell every drop it makes. The nation is, for the first time, importing large amounts of refined fuel daily.
While this is good for Sunoco and other refiners, it is expensive for consumers and fleet operators, particularly when the dollar weakens and it takes more of them to buy a barrel.
Sunoco, with more than 4,300 employees, says it saw this coming. Over the last 15 years, it bought local refineries from Arco, Chevron and El Paso Corp. It has been linking them to work together in ways that increase output by reducing the impact when sections are taken down for maintenance or repairs.
Fundamentally, said Vince Kelley, senior vice president for refining, ''Our focus has shifted from things beyond our control to things we can control — improving safety and reliability and optimizing output.''
Sunoco, for example, has built a big control center in Philadelphia that allows it to tweak the variety of products produced, as market prices fluctuate, to yield higher profit.
One wall has 10 jumbo television screens that give an overview of every process in the 1,000-acre Philadelphia complex. From clusters of computer terminals, workers manage each refining step, communicating by radio with workers at the units.
Sunoco is converting an idle cracking unit to upgrade heating oil to ultra low-sulphur diesel fuel, which commands a higher price.
The control center also includes new approaches to safety and reliability. If an operator feels groggy or stiff, there's an exercise area overlooking the control room with an array of workout equipment.
Sunoco also emphasizes safety training, all part of the strategy to minimize shutdowns and losses. At a cluster of consoles used for training, Rickey Small, a 20-year refinery veteran, is harvesting data from operations to create training simulations.
''You could sit out there for months and months and never see anything like this,'' Small said as he tapped a few keys, triggering a sequence of alarms and a growing crisis on the training screens.
Looking on, W. Roger Lyle, vice president over Sunoco's Philadelphia area refineries, said, ''Refinery work is 80 percent routine, 15 percent problem-solving and 5 percent terror. This (the simulations) could take out the terror.''
Sunoco also has been modifying its refineries to broaden the range of light, sweet crude oils it can process, giving it more sources of oil that add up to 7 million more barrels available daily.
And it is shopping to buy refineries able to process heavier, sour crudes, which are more abundant.
With light, sweet crude expected to average $85 per barrel in 2008, the discounts available for buying heavier crudes make it economically feasible to cover the extra cost of refining it, said Dwight Wiggins, principal of Silver Eagle Energy LLC, a consulting firm with no connection to Sunoco.
Sweet means the crude has a low sulphur content; light means it is more liquid. This translates into a less costly refining process. Sour Venezuelan crude is high in sulphur and is so thick it ''becomes solid at room temperature. You could lay a brick on it and it wouldn't sink,'' Wiggins said.
Several projects are under way to increase the nation's refining capacity and reduce imports, which could blunt Sunoco's edge. Motiva Enterprises LLC, a joint venture between Shell Oil Co. and Saudi Refining Inc., recently began work on expanding its Port Arthur, Texas, facility. The $7 billion project will more than double its capacity to 610 million barrels per day, surpassing the ExxonMobil Corp.'s Baytown, Texas, refinery as the nation's largest.
Sunoco declined to predict when U.S. refining capacity will catch up with demand. Drosdick, the chief executive, would say only that the tight capacity that benefits his company will last at least three more years.
Wiggins, the refinery executive-turned-consultant, said the United States will have to do a lot of refinery building to keep up with increasing demand.
On paper, the United States can refine 16.5 million barrels daily, and the demand often exceeds 18 million barrels, Wiggins said.
Like motorists, Sunoco Inc. worries when crude oil prices soar, as they did in 2007.
Get the full article here.
Comments
Click here to post your comments
