A Japanese oil refiner is seeking permission to bring jet fuel by tanker into the Port of Anchorage, a move that could help cure what has been a costly problem for the air cargo industry.
Cosmo Oil of USA Inc., a Torrance, Calif., affiliate of Tokyo-based Cosmo Oil Co. Ltd., on July 10 applied to the Alaska Department of Environmental Conservation for an oil discharge prevention and contingency plan, or C-plan.
Oil and fuel shippers are required to have a highly detailed plan for responding to spills before they can operate in state waters.
If Cosmo’s plan is approved, it will be the second fuel provider to recently obtain permission to ship jet fuel through Cook Inlet to the Port of Anchorage.
On July 30, DEC officials approved a C-plan amendment to allow Anchorage-headquartered Delta Western Inc. to bring tank vessels into Cook Inlet. Delta Western is a major distributor of fuel and other petroleum products around the state, including Southeast Alaska, Western Alaska and Dutch Harbor, one of the nation’s top commercial fishing ports.
Jet fuel crunchThe potential arrival of new supplies of jet fuel comes as welcome relief to the air cargo industry, which uses Ted Stevens Anchorage International Airport as a major fueling and package-sorting stop on flights between Asia and North America.
Earlier this summer, state officials grew anxious when as many as 25 wide-body cargo jets per week were simply flying over Anchorage rather than stopping due to lack of jet fuel availability. Typically, the Anchorage airport sees some 600 landings of big cargo jets per week.
Such overflights are expensive for air carriers, who must displace revenue-generating cargo to carry more fuel, as well as Alaska’s airport system, which was on track to lose $1 million a year in revenue.
Two key factors play into the jet fuel shortage.
First, the state long has grappled with a shortage of in-state fuel production relative to the huge and somewhat seasonal need at the Anchorage airport. The state has four refineries that can make jet fuel — the Flint Hills Resources refinery at North Pole near Fairbanks, the Tesoro refinery at Nikiski, and two Petro Star Inc. refineries at North Pole and in Valdez.
The Petro Star refineries supply jet fuel to the military, while the Tesoro refinery can produce only limited amounts of jet fuel as part of its production mix.
The big jet fuel producer is Flint Hills, which sends its output by train to Anchorage. Flint Hills production, however, has been irregular as the company struggles to make the plant economic. Coming into the summer, Flint Hills reactivated a third crude oil processing unit to help alleviate what could have been an even worse jet fuel crunch.
The second factor driving the jet fuel shortage has been a strong and welcome rebound in air cargo traffic through the Anchorage airport as the recession eases, airport managers say. This was a factor in Flint Hills bumping up its production.
But a worry is that Flint Hills will move to partially shut down its refinery this fall to avoid having to do the job in bitter cold conditions.
This raised the specter of jet fuel shortages during the peak season for the air cargo business, October through November, as shipments rise for the holidays.
Who is Cosmo?The arrival of Cosmo and Delta Western on the scene could help fill the supply gap just at the right time. Having fuel available is key to keeping Anchorage among the top air cargo hubs in the world.
“That could fall off in a heartbeat if we don’t have reliable fuel,” said Jim Hemsath, deputy director at the Alaska Industrial Development and Export Authority.
Anchorage faces competition as an air cargo stop from Vancouver, British Columbia, and Seattle.
Jet fuel shipments into the Port of Anchorage, even from foreign sources, are not all that unusual, state officials say. It happens.
But Cosmo is a new entrant into Alaska, its C-plan application indicates.
Cosmo is one of Japan’s top oil refiners and a major petroleum distributor, the Hoover’s business information service says. It imports crude oil from the Middle East, runs four refineries and markets its goods through some 3,800 gas stations.
According to its application, Cosmo plans to operate double-hulled, spot charter tankers between Sakai, Japan, where the company has a refinery, and Anchorage.
It aims to transport up to 300,000 barrels of Jet A aviation fuel on a monthly or quarterly basis, depending on market demand at the Anchorage airport.
The fuel will be off-loaded at the Port of Anchorage, where it “will be stored and distributed by others,” the Cosmo application says.
Neither Cosmo nor any of its subsidiaries have ever operated in Alaska state waters, it says.
The Anchorage office of Entrix, an environmental and natural resource management consulting firm, prepared Cosmo’s C-plan.
‘The good news’John Parrott, manager of the Anchorage airport, told Petroleum News the West Coast is a net importer of jet fuel, so supplies from that region aren’t always available for shipment to Anchorage.
“The good news is that cargo traffic is coming back up at the airport,” he said. “I’m glad to know that it appears we will be able to maintain a stable fuel supply.”
The fuel crunch, and the overflights, have been the subject of considerable concern this year, with the Alaska Senate Transportation Committee holding a hearing on June 29 and various industry players, state officials and others holding a May 21 meeting to talk about the supply issue.
Minutes from that meeting indicate that airport fuel needs for 2010 could average 56,000 barrels per day, peaking at 64,000.
“Part of the problem is that the carrier demand is not in sync with the refinery production curves,” the minutes said.
Three companies were mentioned at the meeting as potentially interested in obtaining the necessary C-plan approval for hauling fuel to Anchorage: Cosmo, Delta Western and Morgan Stanley.