Plans to idle more than 50% of refining capacity in the US Northeast are likely to cause problems for supplies of petroleum products to the region, the US Energy Information Administration said Friday in a report.
"The transition period as supply sources shift could be problematic for ultra-low-sulfur diesel, gasoline and jet fuel supplies," EIA said.
The challenge of adequately supplying New England and Central Atlantic states could be compounded by "prolonged uncertainty over the coming months" regarding the disposition and operation of key infrastructure, such as pipelines, ports and storage, EIA said.
Moreover, longer delivery times and potential transportation bottlenecks in the short term could lead to price volatility, the agency added.
Sunoco and ConocoPhillips have recently proposed the sale of three refineries in southeastern Pennsylvania that account for more than half of the Northeast's refining capacity.
In September, Sunoco announced it would sell refineries in Philadelphia and Marcus Hook, Pennsylvania, part of the company's plan to leave the refining business by mid-2012. Later that month, ConocoPhillips said it would idle its Trainer refinery pending its sale, along with associated pipelines and terminals.
On December 1, Sunoco announced the immediate closing of its Marcus Hook refinery.
In 2010, the three refineries combined to produce 315,000 b/d of gasoline, 194,000 b/d of distillate and 41,000 b/d of jet fuel, EIA said. Distillate volumes included 143,000 b/d of ULSD, mainly for on-road use, and 51,000 b/d of higher-sulfur distillate, sold primarily as heating oil.
EIA, the statistical arm of the US Department of Energy, said it received "a number of inquiries" concerning the Northeast refineries, including questions regarding options for alternate supplies. The agency said it would issue a more in-depth paper on the topic in January.
The Gulf Coast is likely to be a "significant" alternate supplier of petroleum products to the Northeast, EIA said.
"Gulf Coast refinery capacity is both more sophisticated and increasing," EIA said. "The main product pipeline to the Northeast, Colonial, would be the preferable transportation option if, as expected, additional capacity were available. Waterborne transportation via tanker or barge on Jones Act vessels is another possibility."
More output from remaining Northeast refineries is likely, although not enough to replace lost volumes, EIA said. Some refiners in the region may see an opportunity to expand or upgrade their capacity in the longer term. Among other options are increased product imports, especially of gasoline, and rail shipments from Midwest refineries, the agency said.
EIA's findings drew quick criticism of Sunoco and ConocoPhillips from Representative Edward Markey, a Massachusetts Democrat, and two other Democratic congressmen from California and Pennsylvania.
"This analysis by the Department of Energy shows that these oil companies are putting profits ahead of the people living in the Northeast," Markey said in a statement.
"As temperatures drop this winter, consumers in the Northeast shouldn't have to face price spikes for home heating oil, gasoline and other fuels created solely by oil companies deciding to shutter refining capacity."
