Hurricane Harvey forces controlled shutdowns at Gulf Coast refineries

Key Points
  • Refineries on the U.S. Gulf Coast were shutting down as Hurricane Harvey strengthened while approaching the region.
  • The controlled shutdowns assure refiners won't have to suddenly cease operations, which can damage equipment.
  • The U.S. Gulf Coast is home to nearly half of the U.S. refining capacity.
Harvey presents bull and bear case for oil: Citi's Edward Morse
Harvey presents bull and bear case for oil: Citi's Edward Morse

Refineries on the U.S. Gulf Coast continued to shut down or curtail operations as Hurricane Harvey barreled toward the nation's main fuel processing hub.

The Category 3 hurricane threatens to dump as much as 35 inches of rain on some areas of the Gulf Coast and cause 12-foot storm surge, raising concerns about flooding at refineries. Companies began controlled shutdowns along the Texas Gulf Coast before Harvey makes landfall on Friday night or Saturday morning.

An orderly shutdown at refineries assures that refiners will not have to rapidly power down the facilities, which can cause damage to equipment. Refiners ideally want at least two to three days to cease operations, according to energy research firm Wood Mackenzie.

The Gulf Coast is home to nearly half of U.S. refining capacity, or about 9 million barrels a day.

Valero is shutting down refineries in Corpus Christi and Three Rivers with combined capacity to refine about 380,000 barrels a day, according to Reuters.

Two other Corpus Christi refineries have also begun winding down operations. Flint Hills Resources is closing its nearly 300,000-barrels-a-day facility, while Citgo Petroleum is winding down its 157,000-barrels-a-day plant, Reuters reported.

Plastics, chemicals and refining company LyondellBasell was preparing for heavy rainfall at five regional plants, including a Houston refinery capable of refining 268,500 barrels a day, according to Reuters. LyondellBasell also initiated shutdowns at four of its chemicals and plastics manufacturing facilities in the region on Thursday.

Phillips 66 said its refining operations have not been affected, though it suspended operations at its Freeport export terminal.

A spokesperson for Marathon Petroleum told CNBC it considers the status of its refining units to be competitive information, so it does not discuss specifics of its operations. However, Reuters reported Marathon's nearly 500,000-barrels-a-day refinery in Galveston is curtailing rates but had no plans to shut down.

Several other refiners did not return requests for comment.

It will take refineries roughly one to two weeks to get back to full capacity if Harvey makes landfall as a Category 2 hurricane, according to Andy Lipow, president of Lipow Oil Associates. It could take two to three weeks if Harvey arrives on land as a Category 3 hurricane, he said.

Harvey is expected to bring heavy rain and significant storm surge. Flooding at refineries could extend outages to weeks or months, analysts and experts say.

WATCH: Harvey takes aim at oil assets

Harvey takes aim at oil assets
Harvey takes aim at oil assets