[StBernard] Murphy Oil Meraux to Restart in April

[Westley Annis]

Murphy restart means full US refinery recovery by April

By Beth Heinsohn
Last Update: 6:02 PM ET Mar 2, 2006


NEW YORK (MarketWatch) -- Murphy Oil Corp.'s (MUR) confirmation Thursday
that its Meraux, La., plant will restart in April means the end of the
refining industry's recovery from the 2005 hurricanes is in sight. 
ConocoPhillips' (COP) Alliance refinery in Belle Chasse, La. and BP Plc's
(BP) plant in Texas City, Texas are also expected to return to operation in
April following shutdowns forced by Hurricane Katrina at the end of August
and Hurricane Rita in late September. Together the three refineries
represent 4.8% of total U.S. refining capacity of about 17.135 million
barrels a day. 
While their removal and extended absence from the fuel supply system has
meant high U.S. prices for gasoline, jet fuel and diesel, the plants' return
may not have much of an impact on retail prices. 
But it could have some marginal fallout on U.S. imports of refined products,
which have held about 30% higher from year-earlier levels since the fall.
The re-introduction of refined products from Murphy Meraux, BP Texas City
and ConocoPhillips Belle Chasse will likely increase domestically available
supply and lower wholesale prices just enough to discourage some imports. 
In addition, the refineries' return comes when seasonal plant maintenance
has taken down a larger than usual amount of processing capacity, partly due
to hurricane damage inflicted on a number of the Gulf Coast's heavy
concentration of refineries. Analysts who have carried out surveys on the
spring maintenance schedule say as much as 2 million barrels a day of
capacity will be idled in March. 
The returning refineries' impact on the global crude oil supply and demand
picture may be as much of a wash. 
Price doves in the Organization of Petroleum Exporting Countries may find
the 5% addition of U.S. crude demand a convincing argument against those in
the group, Venezuela and Iran among them, who want to use typically
depressed demand in the second quarter as justification to reduce output.
The group meets next on March 8. 
Murphy Last Of Three To Confirm April Restart 
Still, the return of these three refineries marks a final step in the
turnaround of the crucial Gulf of Mexico refining industry, after the
damning double whammy of Hurricanes Katrina and Rita left almost 30% of U.S.
capacity offline. Some 6% of oil and gas production in the area is still
down and may not all come back. 
Murphy Meraux, ConocoPhillips Belle Chasse and Chalmette Refining (a joint
venture of ExxonMobil Corp. and Petroleos de Venezuela) are located in the
two worst hit Louisiana parishes and sustained the most damage among the 20
refineries in the storms' paths. 
BP Texas City suffered little damage from Hurricane Rita but extended its
shutdown for months due to safety concerns. Not having experienced a total
shutdown in several decades, and in the wake of a major accident last March
and a near-miss in July, the company elected to do a thorough safety review
prior to restart. 
Murphy confirmed Thursday that it planned to restart its 125,000 barrel a
day refinery in Meraux in April. Previously, Murphy had specified a
resumption in operations early in the second quarter. 
Shuttered after Hurricane Katrina hit southeast Louisiana and caused serious
flooding and other damage in the region, the refinery has spent six months
recovering and replacing damaged equipment. 
"The refinery was flooded," said Murphy spokeswoman Mindy West. "The work
has been primarily cleaning out and replacing motors, pumps, electronics and
other equipment damaged by submersion in water." 
Earlier Thursday, a person familiar with operations at the refinery
specified early April for the restart. The person said the serious degree of
damage meant that normal rates may not be seen immediately. 
Partial operations have already resumed at ConocoPhillips' 247,000 barrel a
day Alliance refinery in Belle Chasse, La., with a full resumption expected
around the end of the first quarter. 
BP hasn't given a specific restart date for its 460,000 barrel a day Texas
City refinery, but several people familiar with the plant and its safety
review expect resumption in operations in late March or early April. 
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