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Leaks force Thai PTT to shut down refinery


August 23, 2008

Leaks force Thai PTT to shut down refinery
Thailand's PTT Aromatics and Refining Plc has shut its 145,000 barrels per day (bpd) Rayong refinery after leaks upset production and also due to poor processing margins, Reuters reported, quoting industry sources Friday.

The outage added to the reduction in Asian refining production in recent weeks due to weakening margins.

"The shutdown will take 27 days starting from Aug. 21. The product import programme is under consideration," one source said.

PTTAR President Chainoi Puankosoom told Reuters he was not able to pin down the exact days of the shutdown.

"I can't confirm the figure 27 days because it will take us two to three days to wait for the system to cool down. We will examine the system on Sunday," he told Reuters.

"By Monday, we should know how serious the leaks are."

He added that the shutdown "will not have a significant impact on our revenue.

"We still have our share with SPRC, and domestic supply is still abundant as everybody has excess for export."

PTT Plc, which owns 64 percent of Star Petroleum Refining Co (SPRC) and Chevron Corp, with 36 percent, jointly operates a separate 155,000-bpd refinery.

One source said that PTTAR, which occasionally exports gas oil, may instead import 30,000 tonnes of the auto fuel. Most of its output are for domestic consumption. "There are enough stocks in the local system, and they are unlikely to import gasoline, jet or fuel oil," he added.

Counterpart Thai Oil Plc, the country's single-largest refinery, is running its 275,000-bpd plant at full tilt, which could also help ease the shortages.

"Additionally, PTT is a very large company and has existing refining capacity that could offset the outage at Rayong," said the trade source.

Problems at the Rayong refinery started at the heat exchanger on Thursday morning, prompting the refiner to cool down production, Chainoi had said.

Industry sources said the outage also affected production at the hydrocracking and diesel hydrotreating units, which will take time to fix.

But because margins had been poor recently, the refiner chose not to run only the hydroskimming unit, and decided to shut down the whole facility, they added. Hydroskimming is the simplest stage of secondary refining.

While the impact on oil products may be limited, the effect on crude will be more immediate because the shutdown would depress an already bearish Middle East market due to weakening Asian demand, falling margins and run cuts, traders said.

PTT holds term contracts for Middle East and Asia-Pacific crude but is also a major spot buyer every month, mainly taking Abu Dhabi and Qatari grades.

Middle East crude usually trades two months forward, and the refinery closure would not have a direct impact on trading. But it could prompt PTT to stay on the sidelines for October barrels, as its crude stocks would rise following the shutdown.

Traders said October-loading Abu Dhabi crude was virtually untraded so far, at a time of month when most cargoes should have already been sold, while differentials for flagship Murban crude, which were already at discounts, could fall further.

PTT, which controls most Thai refineries, centralises its spot purchases for crude.

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