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Manager discusses restart of Delaware oil refinery

Randall Chase, Associated Press

WILMINGTON, Del. (AP) -- The plant manager of the Delaware City refinery is not ruling out an expansion of operations at the facility, which said earlier this year that it was putting plans for $1 billion in additions on hold.

Speaking Thursday to the Port of Wilmington Maritime Society, plant manager Herman Seedorf said PBF Energy officials are still focusing on short-term initiatives but that there remains a "large opportunity" for future investments in the refinery.

The expansion plans that were put on hold included installing equipment to reduce the sulfur content in petroleum distillate and recover sulfur that otherwise would go into the atmosphere for resale to the chemical industry.

New Jersey-based PBF's current short-term initiatives include building rail infrastructure at the refinery to accept shipments of North American crude oil.

Seedorf said there are huge supplies of oil in the central and western U.S. and Canada, which he said has the third-largest reserves in the world, behind only Saudi Arabia and Venezuela. While the cost of rail delivery is more than double that of tanker ship, the low cost of the domestic oil reserves makes rail delivery an affordable option in the absence of a pipeline, Seedorf said

"As part of our business plan, we had to get access to those reserves," he said.

PBF Energy purchased the shuttered refinery from Texas-based Valero Energy Corp. in 2010 for $220 million. Seedorf said the company spent considerable time and effort restarting the refinery because of the condition in which Valero left it, and that the process took longer than the new owners would have liked.

Typically, when a large industrial facility is shut down, it is "mothballed," with a company taking steps to preserve idled equipment with the idea of restarting operations later, Seedorf said.

"None of that was done," he said. "The people who shut that refinery down did not expect it to come back up."

"The (plant) inspection records were not very well organized," added Seedorf, saying PBF tested every piece of equipment and examined "every foot of pipe" with an eye toward safety and reliability.

Seedorf said Valero was "a very responsible company" when it came to safety and environmental responsibility, but that it struggled with operational reliability.

Looking to improve that reliability, PBF officials made the strategic decision to shut down a gasifier that used solid residue left over from the refining process to produce synthetic gas as fuel for combustion turbines providing electricity and steam for operations, Seedorf said.

"It's a wonderful idea ... but it didn't work here," he explained.

State economic development officials approved a $10 million grant to PBF earlier this year to help offset the cost of converting the combustion turbines to run on natural gas instead of synthetic gas, resulting in reduced emissions of nitrogen oxide and sulfur dioxide.

Seedorf said the state's support in restarting the refinery, including millions of dollars in incentives, has been critical. But he noted that two private equity groups working with PBF, Blackstone Group and First Reserve, provided the bulk of the financing. PBF is the investment arm of a partnership formed in 2008 by Petroplus Holdings AG, Blackstone and First Reserve to acquire refineries in the United States.

Seedorf said private equity will continue to play a key role in the U.S. economy.

"They have a lot of capital, and they're a source of capital for a lot of our investments," he said.