Moratorium may not affect refinery operations

Published 12:00 am Wednesday, June 9, 2010



LAPLACE – A White House imposed six-month moratorium on deepwater drilling for oil in the Gulf of Mexico is expected to have an immediate impact on rig worker jobs, but economists and industry leaders say it is too soon to determine any impact on oil refining and gasoline production.

The drilling moratorium, imposed last week by President Barack Obama, will shut down or suspend work at 33 rigs in the Gulf and could, according Sen. David Vitter, affect more than 20,000 jobs. Although the ban would eliminate a major source of oil, industry leaders say it is hard to speculate what, if any, affect the moratorium will have on refining production.

“At this point, with it only being a six-month ban, we don’t foresee any impact on our refining operations,” said Bill Day, executive director of media relations for Valero, which operates a refinery in Norco.

“Unless it becomes a multiple year moratorium on drilling, it is hard to speculate right now what it could do for production.”

Leah Warren, spokesperson for Marathon, which runs a refinery in Garyville, said the company is being forced to suspend operations on its Innsbruck prospect well in the Gulf. But she said it would not limit production at any of the company’s refineries nationwide.

“It may alter where our refining operations take in crude oil, but it shouldn’t slow down production at this point,” Warren said.”

Sara Banaszak, an economist for the American Petroleum Institute, said any affect on oil production from the moratorium would come down to refineries deciding whether the cost of getting oil from other locations would outweigh the benefits.

“Each refinery has its own connections to supply links, which may affect their choices,” Banaszak said. “Getting oil from other parts of the country or importing from sources overseas would increased transport costs over time. It could affect the way refineries compete with each other.”

Banaszak said about 50 percent of the crude refined in the United States is imported from overseas locations.

She said a six-month drilling ban could put upward pressure on local prices, because it is expected to decrease supply by 46,000 barrels a day this year and 196,000 barrels a day next year.

She said it is not likely, however, to affect the all world price for oil.

“Prices at the pump track through the global average,” Banaszak said.

“Gulf oil is not a huge part of global supply. It is going to affect jobs at the rigs, but refining operations won’t change. Record amounts of gasoline are coming into the market and refineries are still running full out.”