Oil refinery woes

Originally posted by moon1969
I did read the article. At some point, it can be a legitimate decision to shut down a refinery. I bet that Philadelphia refinery is ancient with parts from as early as the 1930s. Moreover, you would not want to sell a refinery for less than its salvage value, especially if the costs to shut down the plant (safely decommission the equipment) and address a ...[text shortened]... own of a few US refineries will not have much impact on pricing especially over the medium term.

It is more than a few refineries being shut down.

According to the NBC Nightly News 3-29-12 broadcast there are 5 refineries being shut down. The reasons given for the shut downs is transport problems, which I highly doubt is a valid excuse. It had nothing to do with repairs as you suggest.

Perhaps the Obama administration should create incentives for the building of a refinery in ND where the oil is.

Originally posted by Metal Brain
It is more than a few refineries being shut down.

According to the NBC Nightly News 3-29-12 broadcast there are 5 refineries being shut down. The reasons given for the shut downs is transport problems, which I highly doubt is a valid excuse. It had nothing to do with repairs as you suggest.

Perhaps the Obama administration should create incentives for the building of a refinery in ND where the oil is.

The refineries and distribution including pipelines, most of which were constructed during WWII or shortly thereafter, are antiquated and in dire need of expensive maintenance and integrity testing. I worked in that industry for years and saw it. I was responsible for implementing mechnical integrity, and was scared to be around the rusty old leaking equipment pervasive in those facilities. During a Christmas break in law school, I worked a month as a consultant helping to prepare for a shutdown in the BP Texas City plant shortly before their big explosion killing all of those people. I worked in other BP facilities including their salt dome cavern storage facilities, and it was bad. I worked direct for Lyondell (a low-cost producer) and could not believe how old and poorly maintained the equipment in their refinery.

In contrast, I also worked in downstream plastics facilities, specialty chemicals, and pharmaceuticals, and the equipment was generally clean and sometimes beautiful, and typically well-maintained and did I say sometimes pretty. Moreover, as someone who prepared cost justifications for new projects, the captial investment and liability for new facilites in these industries was very reasonable. Quite the opposite, the capital investment and liability for new refineries was prohibitive. The capital investment is massive.

The managers and executives making decisions are focused on good project returns and good quarters and good stock prices. Investment in refineries is too uncertain. Instead, just milk them as long as possible until they die. And invest the fixed amount of available money in other technologies and production and facilities having more certain returns.

I have also worked as a patent attorney in writing patents directed to inventions related to mechanical testing and repair of pipelines.
An excerpt below from one of the many patents I drafted in the technology.

http://www.google.com/patents?id=tDK0AAAAEBAJ&pg=PA1&dq=pipeline+repair+fletcher+yoder&hl=en&sa=X&ei=TjJ2T5yoAcf8gge208yJDw&ved=0CDUQ6AEwAQ#v=onepage&q=pipeline%20repair%20fletcher%20yoder&f=false

http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO1&Sect2=HITOFF&d=PALL&p=1&u=%2Fnetahtml%2FPTO%2Fsrchnum.htm&r=1&f=G&l=50&s1=7500494.PN.&OS=PN/7500494&RS=PN/7500494

Piping is omnipresent in today's society. Piping is found in a wide range of residential, commercial, and industrial applications. For example, piping may be employed in utility distribution, manufacturing processes, chemical/petrochemical transport, energy transmission, plumbing, heating and cooling, sewage systems, as well as in the recovery of spent chemicals/compounds, such as discharges of exhausted chemicals, contaminated water, and so forth. In operation, piping within facilities and over longer distances, may serve to collect, distribute, and transport water, steam, chemicals, petrochemicals, crude oil, natural gas, and a variety of other liquids, gases, and components.

Piping systems, such as pipelines, may convey utilities, energy, and chemical/petrochemical components to industrial patrons, manufacturing sites, chemical/refining facilities, commercial entities, public institutions, consumers, and so on. Undeniably, pipelines (e.g., transmission pipelines) have played a beneficial role in improving productivity in delivery of resources. Indeed, world economies depend on the capability of pipelines to transport feedstocks and products to a diverse range of customers and end-users.

Peak construction of pipelines (e.g., gas and liquid petroleum pipelines) occurred 30-40 years ago, with a majority of these pipelines, including many constructed prior to World War II, still in service. As a result of their age, maintaining the integrity of the aging pipeline infrastructures is costly. Annual costs attributable to mitigating pipeline corrosion and other pipeline failures, potential failures, and anomalies, are in the billions of dollars. Economic considerations of pipeline repair may include labor, material, equipment requirements, available capital, economic return, repair life, pipeline downtime, and so forth. As expected, the economics of pipeline repair can have a significant impact on pipeline productivity.

Pipe failures and damage may be caused by mechanical harm, corrosion, erosion, damaged coatings, failing insulation, adverse operating conditions, weather, and so on. Internal erosion, for example, may occur due to the flow of the contents through the pipeline. Such erosion may be exacerbated by centrifugal forces associated with changes in the direction of the flow path. In regard to corrosion, the external surface of piping may be exposed to corrosive soil or above-ground corrosive environments, and the internal surface of piping may be exposed to corrosive contents. Significantly, erosion, corrosion, and other damage may reduce the wall thickness of the pipe and thus reduce the pressure rating or pressure-holding capacity of the pipe or pipeline. Accordingly, the operations and maintenance personnel of pipeline companies (e.g., gas transmission companies) may determine if a failure or an area of potential failure discovered in a pipeline should be repaired, if a section of the pipe should be replaced, or if the pipeline should be abandoned.

In evaluating repair decisions, pipeline operators and service providers typically consider the pipeline downtime, pipe specifications, the pipe area to be repaired, buried conditions, the above-ground environment, the contents of the piping or pipeline, pipeline operating conditions, and the like. Of course, the pipeline operators and service providers should accommodate regulatory constraints, appropriate industry standards, manufacturer recommendations, and so on. Moreover, the maintenance approach ultimately selected may involve repair of a leak or other failure, or the preemptive repair of a pipe area prior to failure (e.g., leak, rupture, etc.) of the pipeline. Finally, in an effort to maintain pipeline integrity while being mindful of costs, the environment, regulatory constraints, and so on, the pipeline operators and service providers typically assess the maintenance, replacement, and repair of piping/pipelines based on available engineering alternatives and the economic impact of those alternatives

http://www.reuters.com/article/2012/04/30/us-delta-refinery-idUSBRE83T02O20120430

Originally posted by moon1969
I am glad to see you apparently support and recognize the benefit of the federal government having anti-trust laws. The federal government ain't all bad and has useful roles.

As a chemical engineer who grew up in the petrochemical business along the Gulf Coast in Texas and Louisiana, I can tell you the government watches companies like a hawk for any pr ...[text shortened]... explosions, deaths, etc.) require so much expensive mechanical integrity testing on pipelines.

You well know then the great difficulty in getting permission to build a refinery or a pipeline, and as difficult as the maintenance of pipelines is, compare that to the equivalent trucking fleet. NIMBY is the biggest reason for inadequate refinery capacity. Nobody wants to live next door, but everyone wants to buy low cost fuel.

Originally posted by moon1969
The refineries and distribution including pipelines, most of which were constructed during WWII or shortly thereafter, are antiquated and in dire need of expensive maintenance and integrity testing. I worked in that industry for years and saw it. I was responsible for implementing mechnical integrity, and was scared to be around the rusty old leaking equi ...[text shortened]... available money in other technologies and production and facilities having more certain returns.

Isn't it true that a lot of the uncertainty is created by government's attitude and hostility toward the oil industry, particularly that of one party?

Originally posted by normbenign
Isn't it true that a lot of the uncertainty is created by government's attitude and hostility toward the oil industry, particularly that of one party?

The government in the US shows "hostility toward the oil industry"??? Are you serious? What by giving them billions of dollars per year of special tax advantages?:

But an examination of the American tax code indicates that oil production is among the most heavily subsidized businesses, with tax breaks available at virtually every stage of the exploration and extraction process.

According to the most recent study by the Congressional Budget Office, released in 2005, capital investments like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general and lower than virtually any other industry.

And for many small and midsize oil companies, the tax on capital investments is so low that it is more than eliminated by var-ious credits. These companies’ returns on those investments are often higher after taxes than before.

http://www.nytimes.com/2010/07/04/business/04bptax.html?_r=1


Etc, etc. etc.

Originally posted by no1marauder
The government in the US shows "hostility toward the oil industry"??? Are you serious? What by giving them billions of dollars per year of special tax advantages?:

But an examination of the American tax code indicates that oil production is among the most heavily subsidized businesses, with tax breaks available at virtually every stage of the explorat ...[text shortened]... n before.

http://www.nytimes.com/2010/07/04/business/04bptax.html?_r=1


Etc, etc. etc.

It is silly for the link you posted to start by going into the offshore tax havens as if it is only oil companies that do this. This is common practice, not that I condone it. Why not condemn Apple Corporation for example.

http://theweek.com/article/index/227365/how-apple-dodges-billions-in-taxes-a-concise-guide

Here is a short excerpt from the link you posted:
______________________________________________________________
The American Petroleum Institute, an industry advocacy group, argues that even with subsidies, oil producers paid or incurred $280 billion in American income taxes from 2006 to 2008, and pay a higher percentage of their earnings in taxes than most other American corporations.
_______________________________________________________________
Is it true that oil companies pay a higher percentage in taxes than most American corporations? If it is, maybe there is good reason for the tax breaks since there is risk in the industry. I'm not saying I am sure of this, but it is a very good question. Can you answer it?

Originally posted by Metal Brain
It is silly for the link you posted to start by going into the offshore tax havens as if it is only oil companies that do this. This is common practice, not that I condone it. Why not condemn Apple Corporation for example.

http://theweek.com/article/index/227365/how-apple-dodges-billions-in-taxes-a-concise-guide

Here is a short excerpt from the lin ...[text shortened]... industry. I'm not saying I am sure of this, but it is a very good question. Can you answer it?

"The American Petroleum Institute"

Originally posted by KazetNagorra
"The American Petroleum Institute"

Are you saying it is a lie? That is all I am asking.

Originally posted by Metal Brain
Are you saying it is a lie? That is all I am asking.

I don't know, but if I was interested in the tax burden of US oil companies then perhaps a lobby group for the US oil industry isn't the first place I would start looking.

Originally posted by Metal Brain
It is silly for the link you posted to start by going into the offshore tax havens as if it is only oil companies that do this. This is common practice, not that I condone it. Why not condemn Apple Corporation for example.

http://theweek.com/article/index/227365/how-apple-dodges-billions-in-taxes-a-concise-guide

Here is a short excerpt from the lin ...[text shortened]... industry. I'm not saying I am sure of this, but it is a very good question. Can you answer it?

Corporate taxes are on a marginal progressive scale and the oil industry is hugely profitable, so I would not be surprised if it pays "higher percentage of their earnings in taxes than most other American corporations." (Emphasis supplied)

That they benefit from special tax treatment which reduces their taxes by billions of dollars every year isn't in dispute.

Originally posted by no1marauder
Corporate taxes are on a marginal progressive scale and the oil industry is hugely profitable, so I would not be surprised if it pays "higher percentage of their earnings in taxes than [b]most other American corporations." (Emphasis supplied)

That they benefit from special tax treatment which reduces their taxes by billions of dollars every year isn't in dispute.[/b]

Which specific special tax treatments are you talking about?

I'll bet it is not just the oil industry that gets special tax treatments. Don't most high risk ventures get special tax treatment to encourage that risk?

Originally posted by KazetNagorra
The price at the pump is approximately $10/gallon here. The world keeps turning.

Just slower where you live,, yuk, yuk, yuk.... I don't suppose you need to pull a boat to fish pacific halibut then...

Originally posted by KazetNagorra
The price at the pump is approximately $10/gallon here. The world keeps turning.

That's because where I live we are not as "progressive" as where you live......thank God!!!