In strike, refineries rely on tech edge
The heart and soul of a modern refinery isn’t the welders and pipe fitters with grease on their hands; it’s the white-collar technicians seated at computers in a control room, overseeing the flow and temperature of every tank and valve.
That’s why a strike that began in nine of the nation’s refineries Sunday isn’t likely to have much effect on fuel production at the plants. It will probably hurt refiners even less than the last strike 35 years ago, which also had a negligible impact on operations, according to industry analysts and consultants.
“Refineries are highly automated operations that should be able to run with minimal disruption in the initial days and weeks,” Roger Read, an analyst for Wells Fargo Securities, said Monday in a note to investors. “Strikes are not new to the industry and a combination of non-union management and contract workers will be called in to maintain operations.”
The United Steelworkers, a union representing
employees at more than 200 refineries, terminals, pipelines and chemical plants, stopped work Sunday at nine sites after failing to agree on a renewed labor contract. The nine plants account for 10 percent of U.S. refining capacity.
The union is seeking to capture some of the cash windfall that refiners have reaped as shale drilling pushed U.S. oil production to the highest level in more than two decades. The United Steelworkers has rejected five offers made by Royal Dutch Shell Plc on behalf of companies including Exxon Mobil Corp. and Chevron Corp. since talks began Jan. 21.
The strike is the biggest to hit the industry since 1980, when the last set of major strikes at U.S. oil processing plants did not significantly affect production of gasoline and diesel, said John Auers, executive vice president at Turner Mason & Co., a Dallas-based energy consultancy.
“They’re more automated now than in the 1980s,” he said. “I have every confidence that things will go relatively smoothly. Operators may not push their plants as hard in this environment, but they can keep them running without too much difficulty. I don’t think there will be a problem.”
The only plant shutting down so far is a California refinery owned by Tesoro Corp. that already was scheduled for maintenance downtime.
Using nonunion workers and engineers to keep the plants running was part of regular practice during several strikes that took place in the late 1970s and 1980s, Auers said.
Refiners have strategies to continue operating safely while new workers are brought in or repositioned during a work stoppage, said Micky Fleisher, who teaches chemical engineering at the University of Houston.
Refiners including Tesoro and Marathon Petroleum Corp. have outperformed other energy companies in the past several years, boosting profits as cheap natural gas made processing fuel less costly and excess U.S. crude output pushed down the price of the oil they refine.
An index of refiners on the Standard & Poor’s 500 Index has almost tripled since 2011, doubling the return of the S&P 500 and outstripping a broad subset of energy companies in various sectors by a factor of eight, according to data compiled by Bloomberg.
Tesoro, the largest refiner on the U.S. West Coast, said it would shut down its refinery in Martinez, Calif., after it drew the strike while running at half-capacity during maintenance. The refinery can process 166,000 barrels of oil per day, a sliver of the nation’s capacity of more than 17.9 million barrels a day.
Tesoro said in a statement that it was running at normal levels at its two other refineries affected by the work stoppage that began Sunday, using nonunion workers. Other refiners affected by the strike include Marathon, Shell and Lyondell-Basell Industries NV. Refiners said in statements that they were making adjustments to keep operations running.
Although companies will be able to make adjustments to keep their facilities running, their workforces could be stressed during the imminent refinery maintenance season, Read said.
“With planned turnarounds looming large from late February to early May, the impacts of the strike may increase as more manpower is typically required during maintenance season,” he said.