Refiners to blend or store jet fuel surplus

Sam Fletcher
OGJ Online

HOUSTON, Sept. 14 -- With the virtual elimination of commercial air travel in the US for part of this week, refiners are scrambling to either store or blend into other products more than 1 million b/d of unused jet fuel, industry representatives said Friday.

No one knows for sure how much surplus jet fuel may be stacking up. Commercial airlines burned an average 1.3 million b/d of fuel in 2000, compared to an average consumption of 150,000 b/d of a separate category of jet fuel by the US military.

Increased patrols by military aircraft since the terrorist attacks Tuesday in New York and Washington, DC, may greatly increase the consumption of military jet fuel, but not enough to offset the lack of demand for commercial jet fuel, said Kenneth D. Miller, senior principal at Purvin & Gertz Inc., a Houston-based energy industry consulting firm.

"Refiners can't blend that much jet fuel into No. 2 heating oil, but the last thing that the industry or government wants to see is a cutback in refinery runs," said Larry Goldstein, president of the Petroleum Industry Research Foundation Inc. in New York.

As a result, he said, "There are serious containment issues" for the surplus jet fuel being produced.

Officials of Colonial Pipeline Co., Atlanta, said Friday they've cautioned refiners to reevaluate nominations for the amounts of jet fuel to be moved this month and to make sure they have plenty of storage available at the other end of the pipeline if the demand for commercial jet fuel doesn't snap back soon.

The cost of that storage can be prohibitively high, averaging a daily price of 25¢/bbl, one refiner told OGJ Online.

Plantation Pipeline, 51% owned by operator Kinder Morgan Energy Partners LP, said it also is working with refiners to adjust fuel shipments to meet curtailed demand.

Some of the commercial jet fuel can be blended into diesel, another distillate product for which demand is likely to increase as some would-be air cargoes are moved by truck instead. But much of the jet fuel can't comply with the low-sulfur restrictions for diesel, said Miller.

How tight the storage capacity for jet fuel may prove "will depend on how quickly the airlines can get up and running again," Goldstein said. "They opened up Kennedy airport yesterday and then closed it down again. It won't help if airports open and close, open and close."

Even when commercial airlines resume daily operations, they're not expected to get back to the previously normal number of flights for a long time.

"The airlines say they expect to regain only 75% of their previous market. I think even that estimate is too optimistic," Goldstein said. "Companies are going to be wary about having their key people fly to business meetings. And many people taking nonbusiness or pleasure trips won't be eager to get into an airplane again for some time."

It's hard to estimate what effect a 20%-30% drop in air travel might have on airlines and the refiners who sell them fuel. However, Goldstein said, "There are some airlines that won't survive it -- at least, not without some help from the government."

Contact Sam Fletcher at samf@ogjonline.com

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