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Oil producer Hilcorp eyes purchase of shut Louisiana refinery -sources By Reuters

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© Reuters. FILE PHOTO. A sheen is seen on the flooded Phillips 66 Alliance Refinery after Hurricane Ida. This was captured in an NOAA surveillance photo taken south from Belle Chasse (Louisiana), U.S.A August 31, 2021. NOAA/Handout via REUTERS

By Erwin Seba

HOUSTON (Reuters) – Houston-based oil producer Hilcorp is evaluating Phillips 66 (NYSE:)’s refinery in Alliance, Louisiana, for conversion into an oil export terminal, said four sources familiar with the matter, a move that would eliminate it as a source of motor fuels.

Hilcorp (the largest U.S. privately-owned oil producer), which has operations in all 50 states, from Alaska, Pennsylvania, Texas and Texas, didn’t respond to inquiries about its interest. The facility covers 2,400 acres on the Mississippi River.

Phillips 66 refused to comment about Hilcorp’s interests.

The hurricane-damaged refinery remains for sale and its “marketing process is ongoing,” said Phillips 66 spokesperson Bernardo Fallas. He said that the company will repair storm damage and restart the facility.

Phillips 66 met with potential buyers in August for the 255,600 barrels-per-day (bpd), refinery located on Louisiana’s southeast coast. When Hurricane Ida flooded the refinery, a protective wall collapsed and it was forced out of service.

“The U.S. refining business in the future is going to be smaller, not bigger,” Phillips 66 Chief Executive Officer Greg Garland said last month as he laid out plans to advance businesses in renewable diesel, hydrogen and materials for electric-car batteries.

People familiar with the operation of the plant say that most of the water overflowing the facility has been cleared away and employees are now helping to clean it up.

The U.S. Energy Information Administration reported that national refinery capacity fell 4.5% last year, which is 848,385 barrels per day, due to weak profits and work-from home policies, which lowered gasoline demand.

A conversion of the Alliance site into a storage and distribution terminal makes sense, said Andrew Lipow, president of Houston consultants Lipow Oil Associates.

“These refineries are getting older and older especially in a climate where we have seen gasoline demand has peaked,” Lipow said.

One of the three Gulf Coast refineries that have been up for sale is Alliance.

The other two are LyondellBasell Industries’ 263,776-bpd Houston refinery and Royal Dutch Shell’s shuttered 211,146-bpd Convent, Louisiana, refinery.

The Alliance refinery could still have a future in the current energy transition, said John Auers, executive vice president with refinery-consultants Turner, Mason & Company

“It’s still a viable refinery,” Auers said. “We’ve had a lot of capacity turned off. It could potentially come back pretty strong.”

Phillips 66 does have an incentive to make repairs, Auers said.

“You always get more money (for a refinery) if it’s in an operable condition,” Auers said.

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