Delta Buying a Refinery?

Clark1961 said:
Hedging has nothing to do with size and everything to do with goals. A refiner will hedge to maximize profit while an airline owned refinery might hedge to minimize cost. Buying a refinery doesn't make much sense to me otherwise since it's such a low economic margin attached to a large environmental risk. There are times and places when refineries are a great investment. A refinery in North Dakota makes a lot of sense right now. Elsewhere in the US? not so much, maybe the Gulf Coast...
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I think Clark is on to something... Position a refinery right on the North Dakota /Canada border... That way the Keystone pipeline can go straight from the tar sands to the refinery without needing any EPA approval, Canada sells the oil to a US firm, and makes money.... Oil is produced in the US which will reduce tarriffs..... and create jobs for Americans..... Sounds like a win /win to me....:yesnod:
 
If you could get the politics out of it vis-a-vis the EPA, South Dakota has zero Corporate taxes. Just a 4% use tax with an additional 2% allowed to the local municipality and capped at 2%.

They'd probably forego half of that to get a refinery.
 
denverpilot said:
If you could get the politics out of it vis-a-vis the EPA, South Dakota has zero Corporate taxes. Just a 4% use tax with an additional 2% allowed to the local municipality and capped at 2%.

They'd probably forego half of that to get a refinery.
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Have fun with the EPA under this administration, or any previous for that matter. They have become a fiefdom of obfuscation, and self serving, self profiting interests.
 
Anthony said:
Have fun with the EPA under this administration, or any previous for that matter. They have become a fiefdom of obfuscation, and self serving, self profiting interests.
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The problem with doing anything in South Dakota is that the granola munchers in Minnesota will tie it up in litigation for decades. Millions were wasted on prep work to expand the Big Stone coal plant. After years of delays caused by minnesota litigation and the EPA, the consortium of utilities that was going to build the thing just said 'uck it' and withdrew their applications.
 
weilke said:
The problem with doing anything in South Dakota is that the granola munchers in Minnesota will tie it up in litigation for decades. Millions were wasted on prep work to expand the Big Stone coal plant. After years of delays caused by minnesota litigation and the EPA, the consortium of utilities that was going to build the thing just said 'uck it' and withdrew their applications.
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That has happened all over the country. The war on pollution has become worse than the war on drugs, or the war on terrorism. Total government run amok. It is time to shine the light on the cock roaches at the EPA, and watch them scatter.
 
Interesting little bit here:
LONDON (Dow Jones)–Saudi Arabia’s state shipping company, Vela, is set to ship more oil to the U.S. this month, after a flurry of activity in March caught the attention of market participants, shipbrokers told Dow Jones Newswires Thursday.
Vela has chartered at least three supertankers, capable of carrying around 6 million barrels of oil, to ship crude to the U.S. later this month, shipping fixtures show.
“They definitely are having a more active program going west,” a shipbroker said.
In mid-March the Saudi shipping company chartered 11 ships to carry oil to the U.S. Gulf, in part to feed the expansion of a Gulf Coast refinery co-owned by Saudi Arabia’s national oil company, a person familiar with the matter said.
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Hmmm, the industry is going strong with some spending tens+ of millions of dollars just chartering the ships to bring in the crude to expand their business here, yet some are folding. The who is thriving and who is folding doing the same business in the US is kind of interesting. It seems all the small players are dying off and the the big boys are gonna own the entire market again. Not a good sign but makes sense. Nobody in the US seems to recall why the Sherman Anti Trust Act was written.
 
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Where can I sign up for that investment ?

Spend 150mil, get 30mil of welfare, then save 300mil/year in operating cost.
 
Threefingeredjack said:
Will the refinery workers be charged 20 bucks in baggage fees for their lunchpails??? :dunno:
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:rofl::rofl::rofl::rofl::rofl:

Seriously, if they hire the right people, this could probably be one of the best decisions ever. If you own a refinery, you own a lot of waste heat, that waste heat can be used to dry algae for oil stock. That would require advanced thinking management though, and that rare; OTOH, they did buy a refinery....
 
Henning said:
:rofl::rofl::rofl::rofl::rofl:

Seriously, if they hire the right people, this could probably be one of the best decisions ever. If you own a refinery, you own a lot of waste heat, that waste heat can be used to dry algae for oil stock. That would require advanced thinking management though, and that rare; OTOH, they did buy a refinery....
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Excellent point. For all the "Green" technology touted by the enviros, smart conservation and waste heat re-purposing such as your example are nearly free ways to address a significant part of our energy needs.
 
Threefingeredjack said:
Excellent point. For all the "Green" technology touted by the enviros, smart conservation and waste heat re-purposing such as your example are nearly free ways to address a significant part of our energy needs.
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We waste sooo much heat energy we could recapture.:nonod::nonod::nonod: Algae oil is a great way to recapture it because you just need raw heat for drying for the most part.:yesnod:
 
Henning said:
We waste sooo much heat energy we could recapture.:nonod::nonod::nonod: Algae oil is a great way to recapture it because you just need raw heat for drying for the most part.:yesnod:
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Why do you need to dry it ??
 
TripleZ said:
Water based algaes, so you need to separate, then dry before final processing. You don't want water in your fuel.
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Sonicate it or extract it with hexane (like you do for corn/soy oil) or filter the algal mass and press out the oil.

origin_oil.jpg


It's just oil and it floats to the top (see picture above). Soxhlet extraction and supercritical CO2 arel also being used.

That's one of the nice things about this compared to ethanol- no distillation step.
 
Cap'n Jack said:
Why do you need to dry it ??
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My understanding of the process is that the algae needs to be dried before pressing, if that is not true, disregard. It was always my understanding that this was the energy efficiency problem hindering it's viability as an economic fuel.:dunno:
 
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Henning said:
My understanding of the process is that the alae needs to be dried before pressing, if that is not true, disregard. It was always my understanding that this was the energy efficiency problem hindering it's viability as an economic fuel.:dunno:
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Nope. Not true at all- oil is easily separated from water. Look what happens to your vinaigrette after it sits a while on your table; the olive oil isn't that much different than the algal oil.

the big problem seems to be growing the stuff. Open ponds need hardy algae that grow sufficiently quickly that they overwhelm wild algae- thise strains don't produce as much oil.

A closed loop system lets you grow algae that are 50% oil, but these systems are expensive and there's issues with getting enough CO2 to them to grow well.

Companies (Sapphire Energy comes to mind) are experimenting with genetically engineering algae to work around at least some of these problems.
 
Cap'n Jack said:
Nope. Not true at all- oil is easily separated from water. Look what happens to your vinaigrette after it sits a while on your table; the olive oil isn't that much different than the algal oil.

the big problem seems to be growing the stuff. Open ponds need hardy algae that grow sufficiently quickly that they overwhelm wild algae- thise strains don't produce as much oil.

A closed loop system lets you grow algae that are 50% oil, but these systems are expensive and there's issues with getting enough CO2 to them to grow well.

Companies (Sapphire Energy comes to mind) are experimenting with genetically engineering algae to work around at least some of these problems.
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I know guys that were doing pond a few years ago, took them around the Bahamas where they were looking at big ponds and marshes, it doesn't seem to be near as efficient as the pipe systems from what they were saying, but they were going for both. BTW, don't refineries also pump out a lot of CO2 and other algae nutrients as waste products? Any way of bubbling that through? Where can I get some samples of algae oil and algae diesel? I used to run an old Onan on next to anything once it was warm, so long as it filters, it would run on it vegetable or petroleum. Might not always make the same power lol, but the thing always ran.
 
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Henning said:
I know guys that were doing pond a few years ago, took them around the Bahamas where they were looking at big ponds and marshes, it doesn't seem to be near as efficient as the pipe systems. BTW, don't refineries also pump out a lot of CO2 and other algae nutrients as waste products? Any way of bubbling that through?
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Actually, they are considering siting some of these bioreactors near coal power plants and the like for that reason. The bad thing with this idea is while we're being more efficient with the carbon, it's not closed loop where the CO2 we generate is taken up by the algae farms to be used again.

While bad for us in the short term, I wonder if burning fossil fuels isn't restoring balance to the world- releasing carbon that plants locked up long ago. One theory(1) I've heard is that algae sucked a bunch of carbon dioxide out of the air and polluted the atmosphere with oxygen (killing off a bunch of stuff too). Iron in the water oxidized and precipitated out to form the ore we use now. I won't claim us restoring the CO2 balance is true, just a random musing.

(1) http://www.scientificamerican.com/article.cfm?id=origin-of-oxygen-in-atmosphere
 
Cap'n Jack said:
Actually, they are considering siting some of these bioreactors near coal power plants and the like for that reason. The bad thing with this idea is while we're being more efficient with the carbon, it's not closed loop where the CO2 we generate is taken up by the algae farms to be used again.

While bad for us in the short term, I wonder if burning fossil fuels isn't restoring balance to the world- releasing carbon that plants locked up long ago. One theory(1) I've heard is that algae sucked a bunch of carbon dioxide out of the air and polluted the atmosphere with oxygen (killing off a bunch of stuff too). Iron in the water oxidized and precipitated out to form the ore we use now. I won't claim us restoring the CO2 balance is true, just a random musing.

(1) http://www.scientificamerican.com/article.cfm?id=origin-of-oxygen-in-atmosphere
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Yeah, the Earth has been through a lot of atmospheres and climates in it's history. Like I always said, the why is irrelevant, heck, I'll even allow that it's all nature! Now can we please get on dealing with what will be the consequences? Some major projects are dome or underway. The Thames river barrier, the Grand Lagoon in Venice and to those who know the situation all to well, the Deltaworks works project in Holland.

Interesting to think though that an atmospheric change might be an evolutionary event for the positive. Perhaps with a different set of gas levels we wouldn't be so mean and dishonest. Could you imagine what we could accomplish then? The budgets we'd have?
 
Have you ever watched or reviewed Burt Rutan's climate change presentation? I've skimmed it online. I'd be interested in your take: Valid, Tinfoil Hat Brigade, other.....?

I am too lazy to find a link right now...

Cap'n Jack said:
Actually, they are considering siting some of these bioreactors near coal power plants and the like for that reason. The bad thing with this idea is while we're being more efficient with the carbon, it's not closed loop where the CO2 we generate is taken up by the algae farms to be used again.

While bad for us in the short term, I wonder if burning fossil fuels isn't restoring balance to the world- releasing carbon that plants locked up long ago. One theory(1) I've heard is that algae sucked a bunch of carbon dioxide out of the air and polluted the atmosphere with oxygen (killing off a bunch of stuff too). Iron in the water oxidized and precipitated out to form the ore we use now. I won't claim us restoring the CO2 balance is true, just a random musing.

(1) http://www.scientificamerican.com/article.cfm?id=origin-of-oxygen-in-atmosphere
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You know, considering the general effects of mild hypoxia, I wonder if we might not be better off with less O2. :D
 
jhausch said:
Have you ever watched or reviewed Burt Rutan's climate change presentation? I've skimmed it online. I'd be interested in your take: Valid, Tinfoil Hat Brigade, other.....?

I am too lazy to find a link right now...
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No, I haven't - I'll try to google it. Honestly, my rambling was more of a topic-over-beer comment than a serious hypothesis.
 
Qualifications to comment: Chemical Engineering degree + MBA + spouse has been part of the Delta "family" for 42 years

In my opinion this is crazy. First is the already mentioned issue of deviating from a core business that these days takes all the management prowess one company could ever muster.

My biggest complaint is that actually this saves Delta NOTHING. Jet A is a commodity. If Delta's oil refinery division sells its Jet A to Delta's airline division at less than market price, they are simply moving paper profits from one division to the other. The investment in the refinery could just as well been put directly into the airline division in some other way (that is in the core business) that would have improved profits and made that core business stronger.

This is a distraction that Delta does not need.
 
Lance F said:
Qualifications to comment: Chemical Engineering degree + MBA + spouse has been part of the Delta "family" for 42 years

In my opinion this is crazy. First is the already mentioned issue of deviating from a core business that these days takes all the management prowess one company could ever muster.

My biggest complaint is that actually this saves Delta NOTHING. Jet A is a commodity. If Delta's oil refinery division sells its Jet A to Delta's airline division at less than market price, they are simply moving paper profits from one division to the other. The investment in the refinery could just as well been put directly into the airline division in some other way (that is in the core business) that would have improved profits and made that core business stronger.

This is a distraction that Delta does not need.
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The "other" side of the coin is......................

If more refineries in the East Coast area keep shutting down and Delta's refinery continues to produce Jet A then the competing airlines have a interesting fiasco to deal with. It is the ol " supply and demand" thing... if the competitors demand JetA and Delta is the supplier.:dunno::idea::wink2:
 
Lance F said:
This is a distraction that Delta does not need.
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I share your skepticism. Refining is a tough business. High capital cost to enter (although Delta did get it cheap), high energy and maintanence costs, highly regulated and since Delta will be an independent refiner, they will need to get crude on the spot market or long term contract. Guess it is possible that they can control refining costs to produce jet fuel at less than the market rate - we shall see. May depend on how they set up the refining operation, don't know that much about the Trainer refinery, the product mix and the type of crude processed will be critical.

Gary
 
Gary said:
I share your skepticism. Refining is a tough business. High capital cost to enter (although Delta did get it cheap), high energy and maintanence costs, highly regulated and since Delta will be an independent refiner, they will need to get crude on the spot market or long term contract. Guess it is possible that they can control refining costs to produce jet fuel at less than the market rate - we shall see. May depend on how they set up the refining operation, don't know that much about the Trainer refinery, the product mix and the type of crude processed will be critical.

Gary
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Refineries operate at a profit, at least historically. Where exactly is this refinery? If I was going to look for a refinery it would be on the Canadian boarder where keeping fed would be a much simpler issue.

Like I said, if they hire the right people for the project a do it all right, this could actually be brilliant, a leap in how we treat energy as consumers, we make our damn own. What they can achieve is energy independence away from the leveraged money- commodity market. Airlines have always been about eeking out small margins of profit. If handled correctly this can easily provide a return on investment if the whole program is structured and located correctly; especially if it's connected into Conoco's pipeline network with contracted pig access because that gets it distributed everywhere.

The real opportunity comes in taking advantage of what was formerly considered waste product, heat and CO2.
 
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Henning said:
The real opportunity comes in taking advantage of what was formerly considered waste product, heat and CO2.
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You think Delta airlines management can do a better job of this than the experienced oil industry management that is currently running this refinery?
Believe me, the engineers at that refinery worked night and day to eek something/anything out of that waste product/heat/CO2. Unfortunately the cold hard facts are that the costs of doing that exceeded the value. Delta's ownership cannot change that.

There are no 100mpg carburetors.

If the poor taxpayers of Pennsylvania want to give Delta enough money to turn a pig into a poke just for the sake of keeping it open, so be it. However, it is still a distraction to Delta airlines.
 
An uninformed thought....

I see this as a play to be able to hedge their fuel costs without margin risk and the ensuing cash flow drain. They can lock up a long term supply contract for xx barrels and essentially guarantee(a little fudge here) their fuel cost for the lock period. Very little counter party risk other than geopolitical.

If airline B wants to do a similar activity without the refinery they have to take a spec position on heating oil contracts. Lets say that they take a $200mm futures position on $100/bbl and it goes to $150/bbl they have an immediate cash need of $100mm that could take many months to recoup in the lower fuel costs. If they play goes the other way and the contract goes to $80/bbl then they have to rely on their broker to cough up the $40mm. MF Global anyone?

I *think* both tracks accomplish the same thing, but with different risk profiles.
 
Henning said:
Refineries operate at a profit, at least historically. Where exactly is this refinery? If I was going to look for a refinery it would be on the Canadian boarder where keeping fed would be a much simpler issue.
<SNIP>
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Until they don't operate at a profit anymore. Lots of them don't- I know I gave you some references about this in another thread.

Essentially they are running into cost issues for the incoming crude and unable to sell the products at a profit. Refineries produce more than gasoline and Jet A- they make asphalt, tar, feedstock for plastic, fertilizer precursors, solvents, etc, etc. etc. The down economy makes it hard to sell all these products; some are byproducts of something else. If they can't make a profit, they'll sell it at a loss because they'll otherwise pay to dispose of it.

IIRC, this refinery is somewhere in Pennsylvania- around Philadelphia.
 
Lance F said:
You think Delta airlines management can do a better job of this than the experienced oil industry management that is currently running this refinery?
Believe me, the engineers at that refinery worked night and day to eek something/anything out of that waste product/heat/CO2.
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They did not produce algae oil to supplement their petroleum product. Whether management at Delta is cognizant of and willing to take the opportunity is another matter though. The big benefit comes from the the levels of commodity speculation they get to eliminate between them and their fuel cost. I think if they have the right team in place they can really make that pay.
 
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