The potential for power failures in the Midwest due to high energy demand and rough weather poses the biggest threat to the region's fuel production this summer, the head of Marathon Ashland Petroleum LLC (MAP) said on Wednesday.
"The biggest concern for refinery operations is the power grid. Coming into summertime and with the violent storms we have seen, it is clear to us the power grid is stretched," said MAP President Gary Heminger in a conference call.
MAP, 62 percent owned by Marathon Oil Co. and 38 percent by Ashland Inc. , runs seven U.S. refineries with a combined crude distillation capacity of roughly one million barrels per day (bpd).
The bulk of its operations are in the Midwest, a region that has been strafed by deadly storms over the past couple of weeks and which is particularly sensitive to refinery problems due to a shortfall in the region's fuel production capacity.
Oil refinery operations can be brought to a swift and sometimes damaging halt during a power grid failure.
Heminger said that barring power problems, MAP is on course to produce at nearly full rates until the end of the year to take advantage of strong profit margins.
"We've completed turnarounds at our Canton (Ohio) and Garyville (Louisiana) refineries, but there are no major turnarounds planned between the second and fourth quarters," he said. "We are well positioned to run at strong rates for the rest of the year."
He said he expects strong refining margins through the summer due to a lack of U.S. refining capacity and strong demand despite record high gasoline prices.
"Even with gasoline above $2, we have noticed only a slight change in demand," he said. "We expect strong demand growth going forward."
Heminger said MAP is on track to increase refining capacity at its Detroit, Michigan, refinery from 74,000 bpd to 100,000 bpd by the end of 2005. He added that expansions have been completed at the company's Garyville and Texas City plants.
MAP is also scheduled by the end of this year to be more than halfway done in upgrading its refineries for low sulfur fuel specifications required by the Environmental Protection Agency by 2006, he said.