August 31, 2012:

The U.S. Department of Energy loaned 1 million barrels of Strategic Petroleum Reserve oil to a refining company Friday as it and others tried to return to normal operations after a storm named Isaac drenched the Louisiana coast. Marathon Petroleum Corp. received a loan of sweet crude it had requested because of supply constraints caused by Isaac, which continued moving inland as a tropical depression Friday after making landfall Tuesday as a Category 1 hurricane. The loaned oil is different from a release of Strategic Petroleum Reserves and will have to be paid back with the equivalent amount of oil, plus "premium barrels" similar to interest, the Energy Department said. Marathon spokesman Shane Pochard said the loan "will help supply our refining system due to shortages from Hurricane Isaac." Meanwhile, oil companies began moving back into the Gulf of Mexico amid estimates that Isaac could cost the industry as much as $1 billion in lost production and damages. Several companies said they expect to restart production within a few days, although they noted that it will depend on inspections of each platform and other infrastructure.

Refineries lining the Gulf Coast also continued inspections, and analysts said it could be a week or longer before most resume production. "People think taking a refinery down and restarting it is like turning your car off and turning it back on, but it's a bit more complicated," said Tom Kloza, chief oil analyst for the Oil Price Information Service. That could have been one of the reasons for the government oil loan, since it may help Marathon keep its 490,000-barrel-per-day refinery in Garyville, La., from further reductions in operations, said John Parry, a principal analyst for IHS Herold. The refinery had been running at lower rates because of the storm. "It's best to keep the refinery running as full out as you can because when you throttle back the inputs, you are affecting other operations," Parry said. The oil loan probably will supplement on-site supplies and keep the refinery running efficiently for a week or more, he said. It also will help the refinery take advantage of higher margins if it can churn out more gasoline, diesel and other refined products while other facilities are offline or restarting.

Still rising

Kloza said gasoline prices may continue to rise over the next 48 hours because of the reduced refinery capacity, but he added they could drop as much as 50 cents a gallon by year-end. The average price of a gallon of regular gasoline nationally Friday was $3.83, according to AAA, up less than a penny from Thursday. In Houston, the average pump price also was up a fraction of a cent at $3.65.

Not yet restarted

Valero Energy Corp. said its Louisiana refineries in Meraux and St. Charles remain shut down, although operations employees were scheduled to return over the weekend to plan the restart process. Valero spokesman Bill Day said there is not yet a timetable for restarting. The company's Memphis, Tenn., plant, which had been operating at reduced rates because Shell's Capline pipeline from the Gulf was shut down, is increasing toward planned production rates now that the Capline is flowing again, Day said. Phillips 66 said its Alliance Refinery in Belle Chasse, just outside New Orleans, remained shuttered Friday. That plant lost power and was flooded during the storm, and the company said floodwaters were receding on Friday. It expected more than 100 employees to report to work by the end of the day, along with additional emergency generators, fuel and supplies. The company's Lake Charles Refinery in Westlake, La., remains in operation.

More demand possible

Kloza noted that Gulf Coast refineries may see increased demand for gasoline and diesel for South American markets because of a huge fire at a Venezuelan refinery that killed dozens of people.

By Chron.com