Hurricane Harvey's wallop on U.S. oil refiners is just beginning

By Erwin Seba

HOUSTON (Reuters) - Refiners from Corpus Christi, Texas, to Louisiana were working furiously to prepare for Hurricane Harvey which is packing winds of up to 130 miles per hour, and threatening "unprecedented" flooding, according to forecasters.

The storm on Friday had shut 4.4 percent of U.S. oil processing capacity, causing by one estimate a week's worth of product supply constraints. But up to a quarter of the nation's refining output lies in the path of the major Gulf Coast storm, according to current forecasts.

Refining staff were busy securing loose equipment, piling sandbags within plants and reviewing procedures for a shutdown if they became necessary, sources familiar with plant operations said on Friday.

Ride-out crews, who are specially trained to remain during storms, are hunkered down in control rooms monitoring systems at the Citgo Petroleum Corp [PDVSAC.UL], Flint Hills Resources [FHR.UL] and Valero Energy Corp's plants in South Texas, the sources said. The companies operate four refineries, three in Corpus Christi and another in nearby Three Rivers, Texas.

Since 2005 when hurricanes Katrina and Rita devastated the Gulf Coast, refiners have been hardening their plants to better sustain and recover from storms. For example, Phillips 66 erected a 4.5-mile flood wall to protect its Alliance, Louisiana facility.

Most refiners also have generators on raised platforms several feet off the ground or stationed off-site to provide power for repairs and to make preparations to restart after a loss of power.

But Katrina and Rita proved back-up equipment was not the only issue. Refineries near New Orleans were disrupted after several feet of water poured onto their properties.

Rita also took what was then BP Plc's Texas City, Texas, refinery out of operation for seven months after a sudden shutdown of its cogeneration plant caused extensive damage to 27 miles of steam piping.

Like the BP plant, refineries are most often shut after a hurricane by loss of utilities or supply systems.

On Thursday, LyondellBasell Industries reduced production at its Houston refinery to conserve crude oil supplies, sources said, in anticipation of the closure of the Houston Ship Channel. The channel was closed to vessel traffic on Friday.

Lyondell returned production to full on Friday afternoon after finding an additional supply of crude, the sources said.

To conserve its available crude, Marathon Petroleum Corp also reduced production at its 459,000 barrel-per-day Galveston Bay Refinery in Texas City, the former BP plant.

(Reporting by Erwin Seba; Editing by Gary McWilliams and Andrew Hay)