The Daley Note: September 27, 2022
BP (BP) has had a rough go recently. Last month the company’s Whiting, IN refinery shut down due to an electrical fire, temporarily halting operations at the Midwest’s largest refinery (capable of processing 440 Mb/d of crude). The outage pushed CBOB prices temporarily higher and impacted PADD 2 refinery runs, according to the Energy Information Agency’s (EIA) weekly data.
Although BP was able to resume full operations a little more than two weeks later, another fire broke out at its Toledo refinery this past week (September 20), completely shutting down the 160 Mb/d facility. Two workers died during the incident. This fire comes just after BP agreed to sell its 50% stake in the refinery to joint venture partner Cenovus Energy (CVE) for $300 million. The company did not immediately comment on when the facility is expected to come back online, likely leading to prolonged price impacts in the surrounding markets along with a small supply and demand imbalance. If the facility is not back online by October, that imbalance could grow, according to data from East Daley’s Crude Network Model.
Supply into PADD 2 (Patoka) is predominantly fed by Canadian imports, accounting for ~80% of total crude supply in our model. At the start of October, we expect that majority will grow by ~200 Mb/d due to additional volumes imported by Enbridge’s (ENB) Mainline and Line 3 replacement. We attribute this to growing supply from the WCSB and seasonally stronger pipeline shipments.
Should BP’s Toledo refinery remain offline these barrels will have to find a new home, which could benefit midstream companies exposed to the area. Please click the image (or here) to view a higher resolution version of the chart.
Companies including ENB, Plains All American (PAA) and Energy Transfer (ET) operate crude storage facilities and could attract some of the barrels in the form of short-term storage contracts. However, the most likely beneficiaries will be egress pipelines, particularly ones with access excess refining and storage capacity in PADD 3 (Gulf Coast). Strong contenders are ENB’s Spearhead and Flannigan South, which deliver into Cushing and can access the Houston market via Seaway, or Energy Transfer’s ETCOP pipeline, which has plenty of spare capacity and access to the Nederland, TX hub. – AJ O’Donnell Tickers: BP, CVE, ENB, ET, PAA.
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