CITGO asks US to consider options for alleviating Midwest fuel problems

Midwest refiner CITGO Petroleum Corp. Thursday said it is asking US regulators to take action to ensure there are no supply problems in the region this fall while repairs are made to its 158,650 b/d Lemont, Ill., refinery that was damaged in a fire. Repairs could take 5 to 6 months.

By the OGJ Online Staff

WASHINGTON, DC, Aug. 24 -- With gasoline and diesel production at its 158,650 b/d Illinois refinery interrupted for up to 6 months, Midwest refiner CITGO Petroleum Corp. Thursday said it is asking US regulators to take action to ensure there are no supply problems in the region this fall.

"We are committed to our CITGO-branded marketers and we are determined to meet their product needs," said W. A. DeVore, senior vice-president, supply, marketing & lubricants. He continued, "We are concerned about the short-term gasoline and diesel supply in the Midwest. We have contacted the US Department of Energy and the Environmental Protection Agency to determine what help they can provide to ease the gasoline supply situation in the Chicago and Milwaukee markets."

Company officials said a distillation tower at the crude unit portion of the refinery owned by PDV Midwest Refining LLC and operated by CITGO experienced a structural failure Aug. 17 as a result of conditions present after an Aug. 14 fire.

Sources at both agencies said they are studying the situation but did not indicate what kind of intervention if any the government would take if supplies become dramatically curtailed or prices jump.

Past price spikes in gasoline and heating oil have often prompted some members of Congress to call for oil to be released from the US Strategic Petroleum Reserve. Under the Clinton administration, some oil was released in an effort to calm prices. But then Republican presidential candidate and now US President George W. Bush criticized that action, saying the SPR should only be used to bolster supply, not control prices.

Administration sources suggest using SPR now would be an "unlikely" choice for the president; a more likely scenario would be for EPA and or DOE to "ask" other refiners in the region to postpone maintenance to keep the market supplied.

Agency officials so far have declined to speculate on what role, if any, the government may play if prices do indeed skyrocket.

In the meantime, CITGO says it is exploring other options to keep the Midwest market calm.

"We are exploring every possibility to determine how we can best meet our contractual commitments for petroleum products. We have been talking with refiners in the U. S. as well as refiners in Canada to find supplies of refined product. In addition, we are exploring all avenues of transportation including pipelines, ships and barges," said Adolph Lechtenberger, senior vice-president.

"We are also studying how we can operate the refinery units downstream from the crude unit by bringing in feedstocks for those units from outside of the refinery. If we are able to deliver sufficient feedstocks and blending components, we may be able to begin producing gasoline and diesel fuel at the refinery prior to bringing the crude unit back on line. The extent of the production loss will be determined by our ability to bring the rest of the refinery back on line," he said.

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