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Wednesday, September 14, 2005

Platts Daily Status Report of Gulf Coast Energy Industry Recovery

Platts has a daily summary of how US Gulf Coast energy recovery is going, sample here. Highlights:
-- Valero Energy Sep 12 said its 260,000 b/d St. Charles, Louisiana, refinery had returned to full rates over the weekend.
-- Tanker offloading at the Louisiana Offshore Oil Port (LOOP) is close to normal Sep 12, although capacity remains restricted, the Louisiana Department of Transportation said. LOOP handles 35-40 ships/month. Its maximum capacity is 80,000 bbl/hour or 1.92-mil b/d...

-- Valero Energy, the largest US refiner, said Friday it would delay where it can any upcoming maintenance at its refineries to avoid adding to production shortfalls in the wake of Hurricane Katrina.
-- Port of New Orleans President and CEO Gary LaGrange said Friday commercial operations should resume at the port by Sep 14 at about 10% to 15% capacity. "We're looking to be 100% within six months," he told Platts.
-- The California Air Resources Board Friday relaxed the state's gasoline volatility standard in September and October in response to anticipated gasoline supply shortfalls attributable to Hurricane Katrina.
-- Shell Sep 9 said its Motiva joint venture has begun to restart its 240,000 Norco refinery in Louisiana that had been idled for almost two weeks due to Hurricane Katrina. The plant will be gradually brought up to full production "over the next couple of days," Shell said in a statement. The company also said Motiva's 225,000 b/d Convent refinery in Louisiana is currently operating at 90% of capacity.
All good energy news.

On the down side, Platts notes:
High freight rates have become a determining factor in market dynamics. For instance, rates have at times blocked otherwise wide- open arbitrage windows, and have raised the outright value of spot commodity sales. They have also upset term negotiations based on freight netbacks, and spawned Forward Freight Agreements (FFAs) to hedge the risk of freight costs surging as a proportion of the cargo cost. The overall effect of this is the distortion of relationships between FOB and CFR markets, and a change to trading patterns.
As most petrochemicals use naphtha, an oil derivative, as their main feedstock there is a strong correlation between prices, and the ensuing demand and transportations issues that occur in an incredibly tight market. Freight rates for ethylene on the Intra-Asia route have risen from $45-50 to $100-120/mt between 2002 and 2005, an increase of approximately 135%. Freight rates for benzene on the Intra-Asia route have also risen 100% from $25- 35/mt to $55-65/mt for 1-2kt loadings in this same period...Where vessels themselves are concerned, shipbuilders are paying up to 70% more now for steel to build ships that were ordered when tanker prices were at a 10- year low in 2002 and 2003. As a result of rising steel prices and a strong Won, South Korea's major shipbuilder Samsung Heavy Industries reported in May this year a net loss of Won 4.5-bil ($4.5-mil) in the first quarter of 2005, compared with Won 42-bil profit in the same period the previous year. Major shipbuilders Daewoo also went into the red in the first quarter of 2005, which has added to the domino affect on the price of freight.

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