Refinery to shut down in October for a month

Suncor closure may hurt supply, drive up prices

Gargi Chakrabarty, Rocky Mountain News

Tuesday, September 4, 2007

One of Colorado's two refineries in Commerce City that turn crude oil into gasoline and diesel will be shut down for a month beginning Oct. 1, possibly squeezing fuel supplies and pushing up prices at pumps.

Owner Suncor Energy said the planned shutdown for maintenance work has been scheduled for October because that month typically sees low demand for gasoline from drivers.

But a refinery customer, Gray Oil Co., a wholesale buyer of gasoline and diesel, is concerned. Shutting down the refinery could hamper fuel supplies that already are tight, said Bryant Gimlin, energy risk manager at Gray Oil.

Also, given this year's expected bumper crop of corn in October, the shutdown could make it hard to meet diesel demand from truckers.

The two refineries together have a combined capacity of more than 90,000 barrels a day, supplying about a third of Colorado's gasoline and diesel fuel demand. The refinery being shut down for a month processes 30,000 of those barrels.

Colorado has seen record pump prices in the late spring and summer, mostly because of refinery shutdowns, some planned and others unplanned, due to floods or fires. A new refinery has not been built in decades, putting pressure on the existing ones to meet the growing demand for fuel.

So any shutdown stirs concerns.

"October is a busy month. Construction companies try to finish up projects before winter, (and the) agriculture harvest will increase the demand for diesel from crop transporters," Gimlin said. "From our standpoint, October is not a good time for a shutdown."

On Friday, the average price of regular gasoline in Colorado was $2.87 a gallon, according to AAA's daily fuel gauge report. Last month, the average was $3.02.

Prices for regular unleaded peaked at $3.35 a gallon in late May.

Colorado's previous record was set Aug. 11, 2006, when the average price hit $3.076.

Suncor said during the shutdown the refinery will honor its supply contracts with long-term customers. The company has informed the spot buyers to make alternate arrangements, said Steve Douglas, Suncor's general manager of marketing.

"Is there generally an impact on the market? Yes," Douglas said. "What we try to do is have this maintenance at low-demand times of the year, either at early spring or in the fall, as opposed to peak driving seasons. We would never do this in July or August."

Suncor bought the refinery from Valero for $30 million in 2005 to complement the other refinery it bought in 2003 from ConocoPhillips for $150 million.

Of the 90,000 barrels a day processed, 45 percent are turned into gasoline, 30 percent into diesel fuel, and the rest into heavier byproducts such as asphalt.

Suncor also owns the 45 Phillips 66 gas stations in Colorado.

Colorado's two oil refineries

• The state's two refineries, owned by Suncor Energy, provide a link between the company's oil sands resource base and the growing energy market in the U.S.

• The Commerce City refineries together process 90,000 barrels of crude oil per day, supplying about a third of Colorado's gasoline and diesel fuel demand, including jet fuel to Denver International Airport.

• The refinery being shut down in October processes about 30,000 of the 90,000 barrels.

• Portions of the refinery complex recently completed a $540 million upgrade to meet clean fuel regulations and handle a wider range of oil sands products.

• The refineries are the largest supplier of paving-grade asphalt in Colorado.

chakrabartyg@RockyMountainNews.com or 303-954-2976