|
Flint Hills production lags Anchorage International air carriers scramble for jet fuel due to spike in demand Stefan Milkowski For Petroleum News
A spike in demand for jet fuel at the Anchorage International Airport has led to fuel shortages and caused air carriers to dramatically increase the amount of fuel brought into the state.
Fuel demand among cargo carriers typically surges in October and for the first few weeks of November, according to Mike Whitlatch, chairman of the Anchorage Fueling and Service Co., a consortium of 16 global airlines responsible for about 90 percent of fuel used at the airport.
But this year, the surge was stronger than usual. “The demand kind of went from all-time low to basically near-record highs,” Whitlatch said in an interview Nov. 18.
Despite increased fuel orders, airlines have struggled with fuel shortages since October, when AFSC first asked carriers to reduce the amount of fuel they draw in Anchorage.
“Airlines made operational adjustments, which included rerouting flights — bypassing Anchorage — or tankering in fuel,” Whitlatch said, adding that carrying more fuel into Anchorage increases airlines’ costs and reduces cargo loads.
Fuel levels at AFSC’s airport operations recently reached “critically low” levels. “We expect to see low levels probably through the 24th of November and potentially again at the end of December,” he said. “We’re not out of the woods yet.”
One of largest air cargo stops The Anchorage airport is one of the world’s largest stops for air cargo. According to Energy Information Administration data, only four states had larger sales of jet fuel in 2008 than Alaska.
But cargo traffic — and sales of jet fuel — have varied widely in recent years. Sales of jet fuel in Alaska increased steadily from about 1.5 million gallons a day in the early 1990s to a high of 3.2 million gallons a day in 2005, according to the EIA. Volumes have fallen each year since then, and 2008 sales of 2.4 million gallons per day represent a 25 percent drop from 2005.
Sales continued to drop in early 2009, which Whitlatch blames on the weak economy and disruptions associated with eruptions at Mount Redoubt.
Jet fuel is supplied to the airport by a handful of refineries within Alaska and by deliveries from the U.S. West Coast and abroad.
Flint Hills state’s largest The Flint Hills Resources refinery in North Pole is the state’s largest, and roughly 60 percent of its production is jet fuel.
Earlier this year, Flint Hills shut down one of its three crude oil processing units in response to the weakened demand for jet fuel. The company’s director of external affairs, Jeff Cook, told state lawmakers in March that Flint Hills couldn’t market the excess jet fuel and had no place to store it. (See “Refinery shuts unit on declines; Senate considers gouging bill,” March 22, 2009.)
Cook said in an interview Nov. 19 that the unit remains shut down.
Production of jet fuel and other products was halted completely at the Petro Star Inc. refinery in Valdez after a fire there in December. Production returned to full capacity in October.
Tesoro Corp. also provides jet fuel to the airport from its refinery on the Kenai Peninsula and from refineries on the West Coast and abroad.
Outside sources The recent surge in demand for jet fuel at the airport is largely being met by sources outside Alaska. Steve Ribuffo, deputy port director for the Port of Anchorage, said shipments of jet fuel coming into Anchorage jumped dramatically in November.
“We are probably going to receive over 900,000 barrels of jet fuel this month bound ultimately for Ted Stevens International Airport,” he said. “It’s probably at least twice as much as a normal month during the season when we get petroleum deliveries.”
Cook said Flint Hills is meeting all of its customer demand and producing jet fuel beyond its contractual obligations. But he added that the refinery is producing slightly more than half as much jet fuel as it did two years ago.
Cook said the company has no plans to restart its third processing unit in response to the uptick in demand. “You need to have a long-term sustained demand to justify doing that,” he said.
Flint Hills taking less oil Division of Oil and Gas Director Kevin Banks said in an interview Nov. 18 that Flint Hills, which buys royalty oil from the state to make its products, is taking “a lot less oil” than it used to. “They’re actually below what was going to be a minimum volume that was in their original contract with us,” he said, adding that the state would be flexible.
Banks said he would be surprised if this month’s heavy reliance on out-of-state jet fuel resulted from any price differential between domestic and foreign sources. “It might be true that Asian refineries sell jet for less than West Coast refineries, but that’s because the market for jet is on the West Coast,” he said. Lower prices would be required to account for the extra shipping cost.
Cook declined to comment on pricing matters.
Despite operating its refinery at partial capacity, Flint Hills is doing better than before, according to Cook.
In March, Cook told lawmakers the company was “losing money again” and said the outlook for the future was uncertain. Flint Hills, which had put the refinery up for sale, met with the state’s Department of Natural Resources to discuss ways to keep the refinery operating.
Cook said Nov. 19 that the facility is no longer for sale.
“Our economics became better,” he said. “We’re moving right along.”
| 