Major US winter storm could disrupt some lower Midwest, North Texas refineries

From the Texas Panhandle eastwards to the Appalachian Plateau and onto the Atlantic Coast, US refiners Jan. 23 were preparing for bone-chilling cold weather and the arrival of a major storm forecast to begin over the weekend.

The National Weather Service has issued a plethora of warnings and watches for individual regions, with some roads already closed ahead of the storm, expected to begin later Jan. 23 in the southern Rockies and move into the mid-Atlantic regionby late Jan. 24.

"This is expected to produce large swaths of heavy snow, sleet, and freezing rain, bringing hazardous driving conditions, power outages, and tree damage," said the weather service in a 2:37 pm ET forecast discussion.

The storm is bullish "for gasoline and diesel cracks if refineries across Oklahoma, Arkansas and Tennessee are affected by power outages and freeze-offs," S&P Global Energy CERA analyst James Bambino said in a report. "This bullish impact will likely be mitigated in part by the BEARISH impact the storm puts on driving and, therefore, gasoline demand. Sustained colder temperatures across the northeast will likely support diesel cracks."

Winterized

Virtual every refinery at risk is likely to have been winterized, given the history of extreme cold that has been known to sweep through the region early in the year.

"We have comprehensive plans and procedures in place to protect our people, neighbors, assets, and the environment during severe weather," said a spokesperson for Marathon Petroleum, the largest US refiner in an email.

However, even refineries used to cold weather -- like Citgo's Lemont, Illinois, facility -- still feel the effect of very cold weather. The company filed a flaring event with regulators as a unit recently froze during startup.

According to the Association of Petrochemical and Fuel Manufacturers, a refinery trade group, during a cold snap, these plans mean the refineries will also have more operators and maintenance personnel on call/standby. Most of these employees have undergone regular training in emergency response to be prepared for any type of event, including deep freezes, as well as having plans to activate Emergency Operations Centers to maintain the safety of employees and facilities, the AFPM said.

However, the ensuing icy conditions have often cut power supply, forcing refiners to choose between proactively shutting their plants or keeping them running.

"Outside of refiners' control, a sustained power outage could cause disruptions even though many facilities are equipped with backup generators," the AFPM added in an email.

Based on the current weather service forecast and watches and warnings, these refineries appear to be the most likely to feel an impact from the upcoming storm.

Source: National Weather Service; compiled by Platts, part of S&P Global Energy