Bloomberg News

Venezuela Refinery Burns Fourth Day After 48 Die in Blast

August 28, 2012

Venezuela Crude Refinery Burns a Fourth Day After 48 Killed

A fire burns at a storage tank at the Amuay oil refinery in Venezuela. Photographer: Juan Barreto/AFP/Getty Images

Venezuelan firefighters put out the last of three blazes at the country’s largest refinery following an explosion four days ago that killed at least 48 people.

“We’re in a cooling stage now,” Oil Minister Rafael Ramirez said today on state television. “We’re inspecting the affected areas and checking our infrastructure to prepare for restarting operations.”

Hercules cargo planes were used to help extinguish flames on two storage tanks at the Amuay refinery last night, President Hugo Chavez said. A blaze at a third tank flared up at least twice today before being contained.

Amuay, which has the capacity to process 645,000 barrels a day, forms part of the Paraguana complex 240 miles west of Caracas. Damage was limited to the storage tanks and Venezuela has enough gasoline inventories to meet all commitments, Ramirez said. The shutdown threatens supplies of refined petroleum products as U.S. Gulf Coast plants halt operations with Tropical Storm Isaac heading toward the region.

Paraguana General Manager Jesus Luongo said state-owned Petroleos de Venezuela SA will “take its time” to guarantee a safe restart of processing units by ensuring that storage tanks that still contain naphtha fuel are sufficiently cooled.

A gas leak that formed a cloud at the refinery exploded at 1:10 a.m. on Aug. 25, sending a ball of flame into the air and destroying a National Guard post and damaging about 500 homes. Chavez, who faces elections in October, declared three days of mourning and ordered an investigation.

Gasoline Inventories

Venezuela has stockpiles of 4 million barrels of gasoline and other petroleum products and continues to produce 735,000 barrels of the motor fuel a day at plants, including nearby Cardon, according to Ramirez. State-owned Petroleos de Venezuela SA shipped five tankers of crude from Paraguana on Aug. 26, he said at the time.

“It’s probably going to be far longer than their public statements given the track record we’ve seen of maintenance at PDVSA facilities over the last couple of years,” Andy Lipow, president of Houston-based Lipow Oil Associates LLC, said by phone. “I think it concerns the market that it could take a long time given that it’s their largest refining complex.”

PDVSA is the sole owner and operator of the refinery. The blast is among the world’s deadliest at an oil refinery. Fifteen workers were killed at BP Plc (BP/)’s Texas City refinery in 2005, while more than 50 people died in a fire at Hindustan Petroleum Corp.’s refinery in Visakhapatnam, India, in 1997.

‘Earthquake Like’

Amuay, Cardon and Bajo Grande form the Paraguana complex, which has capacity of about 950,000 barrels a day. That’s second in size to Reliance Industries Ltd. (RIL)’s Jamnagar refinery in India, according to data compiled by Bloomberg. CRP, as the complex is known, supplies 67 percent of gasoline to the local market, according to PDVSA’s website. Cardon and Amuay also export refined products to the Caribbean and the U.S.

Stella Lugo, governor of Falcon state in western Venezuela, described the early-morning blast as similar to an earthquake. Lugo told Union Radio yesterday that the death toll had risen to 48 from a previous estimate of 39. There have been no other official comments about a death toll since Aug. 26.

Gasoline for delivery in September, which rallied yesterday, declined 2.89 cents, or 0.9 percent, to $3.1259 a gallon at 3:28 p.m. in New York. BP and other companies suspended some crude and gas operations in the Gulf of Mexico. The area is home to 23 percent of U.S. oil output and 44 percent of refining capacity, according to the U.S. Energy Department.

Stand to Benefit

Refiners with Texas operations that are less exposed to Isaac stand to benefit by exporting more product after the Venezuela explosion, said John Auers, senior vice president at Turner Mason & Company, a Dallas-based energy consultant.

“On a sustainable basis, Venezuela hasn’t been able to produce as much product as they used to,” Auers said by telephone. “The U.S. refiners have taken their place. Now in a short term, they certainly can step up and do even more.”

Shares in Valero Energy Corp. (VLO:US), based in San Antonio, Texas, have gained 6.4 percent in the past two days, while Marathon Petroleum Corp., based in Findlay, Ohio, has risen 2.3 percent.

The fire at Amuay, which opened in 1950, highlights the risk to supplies of oil products from large, aging plants and may lead to more exports from Asia to the U.S., according to Goldman Sachs Group Inc.

Other major refinery fires elsewhere caused months of delays before full operations resumed, Nilesh Banerjee, an analyst at Goldman in Mumbai, said in a note e-mailed yesterday.

Venezuela, one of the 12 members of the Organization of Petroleum Exporting Countries and South America’s biggest crude producer, had an average output of 2.7 million barrels of oil a day last year, according to BP statistics. Its main export markets are the U.S. and China.

Crude Exports

Venezuela was the fourth-largest source of crude for the U.S. in May, after Canada, Saudi Arabia and Mexico, at 821,000 barrels a day, based on data from the U.S. Energy Information Agency. Venezuelan product imports from the U.S. nearly doubled in the first five months of 2012 to 38,000 barrels a day from 23,000 in the year earlier period, according to the EIA. They include gasoline, fuel additives and liquefied petroleum gas.

Cardon has closed units several times this year after incidents. PDVSA had to halt production and evacuate workers from its Petropiar heavy-crude upgrader last year after a gas leak and a fire.

Jose Bodas, an oil union leader, told Globovision on Aug. 25 that PDVSA has ignored calls by workers to improve “hazardous” working conditions at refineries.

Seven out of nine planned maintenance programs for the Amuay refinery were postponed last year because of a lack of materials, according to PDVSA’s 2011 annual report.

Maintenance Spending

Ramirez denied that PDVSA has failed to invest in maintenance and said the company spent $6 billion in the past five years on its refining circuit. Chavez also denied reports that the leak of gas had begun hours before the explosion.

Repairs to the refinery once the fire is put out will take three to five days if damage is confined to storage tanks, James Williams, an economist at WTRG, an energy-research firm in London, Arkansas, said by phone. Bringing the refinery back online may expose faulty equipment that slows a full recovery in production, leading Venezuela to compete to import gasoline that otherwise would go to other countries, Williams said.

“You have to warm everything back up,” he said. “The real problem is the refinery infrastructure which has been poorly maintained.”

To contact the reporters on this story: Daniel Cancel in Caracas at dcancel@bloomberg.net; Charlie Devereux in Caracas at cdevereux3@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • VLO
    (Valero Energy Corp)
    • $50.29 USD
    • 0.50
    • 0.99%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus