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Reports: Houston Ship Channel closure after Deer Park fire could cost $1B

The closure of a portion of the Houston Ship Channel following a chemical fire near the Deer Park refinery could cost the petroleum and petrochemicals sectors around US$1 billion, according to a March 25 report from the Houston Chronicle citing University of Houston logistics and transportation program director Maria Burns.

The figure covers direct and indirect costs as well as lost revenues as the Houston Ship Channel hosts nine refineries, she said.

"A few days of closures typically equates to about US$500 million in direct costs in delayed shipments and lost supply chain materials for thousands of impacted companies. Another US$500 million is estimated to be incurred in indirect expenses from rerouted and canceled shipments and vessel traffic worldwide," Burns said.

Reuters said two oil refineries slashed production in the area on March 25 due to a shutdown of the waterway to clean a chemical spill. Royal Dutch Shell plc cut production at its 275,000 barrel per day Deer Park refinery caused by the shortfall in crude supply, while LyondellBasell Industries N.V. slashed production in its 263,776 bbl/d Houston refinery by 14% due to the inability to use barges to remove sulfur that is produced in the making of motor fuels and limited storage capacity.

Reuters said some Shell units at the refinery, which is a joint venture with Mexican state-owned oil firm Petróleos Mexicanos SA de CV, are expected to return to production soon; however, the size of the production cut was not provided.

A portion of the Houston port, which is the biggest in the U.S., was reopened March 25 after the closure of a seven-mile stretch for three days. The U.S. Coast Guard shut the channel to clean up the chemical spill, which was caused by a dam failure at the Intercontinental Terminals Company LLC petrochemical tank farm, allowing gasoline-blending components to burn and spill. The fire at the ITC petrochemical tank farm was next to Shell's Deer Park refinery.

Reuters said ITC crews were continuing to siphon fuels from its site, the ship channel and nearby waterways on March 25.

Portions of the channel were reopened March 25, but vessels were not authorized to depart until decontamination is complete and were required to keep a 40-minute distance between each other, Reuters reported March 25.

On March 25, the Houston Chronicle reported 31 ships were waiting to move or pass the affected area, while another 31 ships were waiting to depart.