PBF recovering from tough quarter at Torrance

PBF Energy plans to upgrade electrical systems and boost distillates production following a tough first quarter of operations at its 155,000 b/d refinery in Torrance, California.

The refiner will need a more reliable direct connection to an industrial power grid used by other refiners in the region but was working on quicker interim solutions to improve the stability of its power supply from Southern California Edison. A pair of utility malfunctions in recent months cut refinery power and roiled the Los Angeles CARBOB market.

A September outage later attributed in part to heavy fog and an October malfunction caused by a utility worker's wiring error contributed to $60mn in lost PBF profits during the quarter and triggered heavy flaring that worried neighbors already wary of the refinery.

"It is very clear that it is in everybody's best interest to get this solved," chief executive Tom Nimbley said.

Power outages and the sudden loss of control over refining units that follow pose one of the greatest outside risks to operators. Both incidents triggered sudden, full-plant shutdowns from which the refinery took days to recover and restore normal operations.

PBF lacks a direct connection to the utility's 220kV industrial grid, instead drawing supply from a 66kV system shared with roughly 60,000 residential customers. The arrangement leaves the refiner unusually vulnerable to power disruptions. Previous owner ExxonMobil sued Southern California Edison in 2012 for a breach of contract in supplying a stable supply of electricity to the facility. A jury ruled against the company earlier this year.

Neither PBF nor the utility would estimate how long it may take to make the two-mile high-voltage connection between the refinery and the industrial grid. Southern California Edison owns right-of-way suitable for the connection, but will need permitting and approval from local and state regulators.

Unspecified, shorter-term solutions could better separate the refinery from other customers in the interim.

PBF was not considering construction of a cogeneration plant, which would use steam generated at the refinery to turn power turbines. Tesoro's 363,500 b/d Los Angeles refinery and Chevron's 275,000 b/d El Segundo refinery both operate such plants. But refiners in the state have faced increasingly lengthy and costly regulatory delays and local opposition for proposed construction projects, including railed offloading terminals and unit upgrades.

"We think this connection to the 220kV system is actually a better solution than a cogen, and it is certainly a solution that can be implemented faster than trying to permit and build a cogen in southern California," PBF Energy western region president Jeffrey Dill said.

Nimbley meanwhile maintained confidence that Torrance could ultimately prove a more profitable facility than PBF first thought.

The key supplier of Los Angeles-market gasoline was coming off a 15-month outage following a February 2015 explosion associated with gasoline producing equipment under then-operator ExxonMobil. The refinery lost $233mn in 2014 and $526mn in 2015, according to historic financial data.

PBF had already approved a larger slate of crudes for the refinery than the facility had previously run, Nimbley said. Engineers identified a process change that could add 15,000 b/d of distillates production without material investment. And PBF was considering both exports to Mexico and new commercial arrangements to improve the facility's profitability outside the refinery gates, Nimbley said. The refinery still made $30mn in the quarter.

"I remain very confident in Torrance," Nimbley said. "It has to run, but the power of this machine is incredible."