Delta Set To Close Refinery Deal
Delta Air Lines is set to close its landmark deal to buy a US oil refinery later this month, allowing it to begin a long-delayed maintenance overhaul in early July, sources said on Tuesday.
Delta will take possession of the Trainer, Pennsylvania refinery from Phillips 66 on June 22, according to sources familiar with the situation. Workers are expected to return to work the week of June 25, after the transfer of assets.
A plant-wide turnaround lasting 40 to 50 days is expected to begin after July 4, allowing the idled plant to resume producing fuel, one source said. The major maintenance, which is required every five years, was originally due in the spring of 2011, but had been deferred until the plant was shut later that year.
A Phillips 66 spokesman said the deal would close before the end of June.
When the USD$180 million deal was announced in late April, Delta had said it wanted to close the transaction in the first half and begin producing fuel during the third quarter.
It also said it expected to reconfigure parts of the refinery in order to maximize jet fuel production, a process that should also be complete by the end of the third quarter.
A spokesman for Delta declined to comment.
About 175 out of the 220 hourly workers are expected to return to the plant, with the remainder either retiring, transferring or getting other employment.
The Trainer refinery's gradual progress toward resuming production threatens to put new pressure on the Atlantic Basin refinery profit margins, which have risen after years in the doldrums following a wave of shut-downs that purged excess capacity.
Trainer has been idle since September 2011, one of a handful of older refineries on the US East Coast, Caribbean and in Europe that had been battered by diminishing fuel demand, costly imported crude and growing foreign competition.
But a number of those plants are now being reopened under new ownership, risking a new decline in margins.
Delta's deal for Trainer is the first time an airline has looked to hedge its fuel costs by buying a refinery, a move it said would allow it to save USD$300 million annually on its jet fuel bill, which reached USD$12 billion last year.
Delta will not deal with trading. Oil major BP will supply crude to the plant, while BP and Phillips 66 will get a share of the gasoline, diesel and refined fuel to sell, in exchange for supplying Delta with jet fuel in other locations.