The Scotsman: Shell Rotterdam refinery forced to scale back output: Posted Friday 6 January 2006

By Melissa Akin and Niklas Mika

LONDON/AMSTERDAM (Reuters) - Europe's largest refinery, Shell's 418,000 barrels per day Pernis plant in Rotterdam, was forced to scale back operations on Thursday and the company said a utility failure was the cause.

The refinery lost production of steam, which is crucial as a source of power for refinery operations and in high pressure, high temperature processes used to produce gasoline and diesel.

A reduction in supply from Europe's biggest refinery could drive oil prices higher as markets zero in on potentially short supplies of gasoline and other oil products in the United States in 2006. Crude prices were near a three month high on Thursday.

The refinery is a key supplier to both export and European markets.

European traders said the refinery had stopped loading gasoline and had withdrawn barge offers, while excess supplies from Shell's German refineries may be redirected from European markets into Shell's own system.

Traders said it was unlikely that key gasoline and diesel units were running after the loss of steam.

A Shell spokeswoman in London said the refinery was working to return to normal operations. The refinery's chemical plants were shut down, she said, but declined to give further details of the problem at the Rotterdam refinery.

Oil traders said the problem may have originated in a boiler or furnace. The extent of the disruption remained unclear but traders said crude distillation had stopped.

"We can confirm that we currently have a utility failure at our Pernis refinery and have a lack of steam," the Shell spokeswoman said.

A worker in the refinery's crude distillation units told Reuters by telephone: "There is a big problem here."

Rotterdam police said there was no fire, dismissing traders' reports of an electrical blaze at the refinery.

It was the second time in six months that the refinery, in which Norwegian oil company Statoil has a small equity stake, has had to cut production after utility problems.

Pernis lost external power supplies in July, forcing the entire refinery to shut down. The restart took several weeks.

European gasoline prices held on to the day's gains, resisting downward pressure from U.S. futures markets after the U.S. Department of Energy's information service issued a weekly stock report showing rising fuel supplies.

With U.S. light crude down 52 cents at $62.90 and London Brent crude futures down 18 cents at 61.50, U.S. gasoline futures were down 0.75 cents at $1.7770 per gallon.

Benchmark European gasoline barges, however, were trading $7-$9 higher on the day at $575 per tonne.

Shell's Dutch chemicals arm, Shell Nederland Chemie, had been shut as a precautionary measure, the spokeswoman said. It manufactures lower olefins, solvents and gasoline blending component methyl tertiary butyl ether at its Pernis complex.

Shell also runs a massive 900,000-tonnes-per-year naphtha cracker in Moerdijk, also in the Netherlands, which makes key petrochemicals like ethylene and propylene that are converted into a wide range of plastics.

Click here to return to ShellNews.net HOME PAGE