|
North Pole refinery to close crude unit Flint Hills says it needs to cut back to a single unit to deal with difficult economics of operating refinery in Alaska’s interior Alan Bailey Petroleum News
Flint Hills Resources Alaska is beginning the process of shutting down one of its two operational crude units in its North Pole refinery near Fairbanks in Alaska’s interior, the company said April 10. The refinery uses as feedstock some of the crude oil passing down the trans-Alaska oil pipeline from the North Slope and produces a variety of fuels and other products for use in Alaska.
The refinery is a major supplier of jet fuel for the Ted Stevens Anchorage International Airport, a hub airport for international air freight. The refinery has three crude units, one of which has been shut down since 2010.
Flint Hills says that it will use its remaining crude unit to continue producing jet fuel, gasoline and some specialty fuels for the Alaska market and that it will continue to meet all of its contractual obligations.
Loss of jobs But the crude unit closure will involve the loss of 35 to 40 jobs.
“This is the most difficult decision we have had to make in operating this refinery,” said Mike Brose, vice president of Alaska operations and manager of the refinery, when announcing the crude unit closure. “We value our employees very much; they are all dedicated professionals who have worked very hard to help us compete in what is an extremely difficult economic climate.”
Affected employees will have opportunities to apply for other positions within Flint Hills, while employees who end up leaving the company will receive severance packages, Flint Hills says.
The North Pole refinery first went into operation in 1977, a few months after oil started flowing down the trans-Alaska oil pipeline. The refinery, which has gone through several changes of ownership, was expanded over the years, eventually reaching a processing capacity of 215,000 barrels per day in 1998. According to the Flint Hills website the refinery now has a maximum capacity of 220,000 barrels per day. However, Flint Hills has declined to comment on the impact of the crude unit closure on the refinery’s throughput.
High oil costs But, as oil prices have risen in recent years, the dependency of the refinery on crude oil, both as a feedstock and as a fuel for refining the oil, has taken its toll on the economics of the plant. Flint Hills says that the plant’s remote location also presents economic challenges.
To reduce its operation costs, Flint Hills has been seeking ways of establishing a supply of natural gas as a fuel at the refinery — in August 2011 the company signed a memorandum of agreement with Golden Valley Electric Association to build and operate a liquefied natural gas facility on the North Slope, to enable the trucking of liquefied natural gas to Fairbanks. Flint Hills has also been making modifications to the refinery, to recover heat from the residual oil that it returns to the trans-Alaska pipeline.
Flint Hills also says that the working of the trans-Alaska oil pipeline quality bank, the procedure whereby the value of the oil flowing down the pipeline is adjusted to allow for the different qualities of oil from different North Slope oil fields, operates to the detriment of the refinery. The problem relates to the value assigned to the residual oil that the refinery returns to the pipeline, Flint Hills spokesman Jeff Cook told Petroleum News.
Bose said that the refinery was designed to use crude oil as an energy source.
“Crude oil prices and Alaska North Slope crude prices in particular are very high and are expected to remain that way for the foreseeable future.” Bose said. “In addition, the calculations associated with the quality bank place our refinery in a disadvantaged position. We need to solve these two problems in order to survive, and a single crude unit configuration gives us the best platform to work on these problems.”
| 