PES to Begin Operating Benzene Terminal in November

Maritime Activity Reports, Inc.

October 21, 2014

Philadelphia Energy Solutions plans to start operating a new benzene offtake terminal next month at its 335,000-barrel-per-day refinery in Philadelphia, two people familiar with the plans said.

While most U.S. refiners are either selling benzene or refining it further, Philadelphia Energy Solutions is using the new terminal to help bring the chemical into the facility, according to an IPO document filed last month.

The benzene facility is the latest step in building up infrastructure at a plant that was nearly shuttered in 2012.

Benzene boosts the octane level of gasoline and reduces knocking in car engines, but is also a carcinogenic and the federal Environmental Protection Agency requires refiners to strip most of it out of the finished product.

With high demand for benzene, a staple in the plastics and pharmaceutical industry, many refiners extract it and sell it. Others convert it for use at the refinery. The choice ultimately comes down to market and location.

Philadelphia Energy Solutions uses benzene to make cumene, a key ingredient in the production of phenol and acetone.

"In most cases, a refinery has a benzene customer nearby. But in Philadelphia, there's not a real market for Benzene, so this solves their problem," said Peter Feng, a petrochemical expert with IHS consulting company.

The refinery's previous owner, Sunoco, operated a cumene plant and a phenol and acetone plant. The phenol and acetone plants were sold to Honeywell and the cumene plant went to Philadelphia Energy Solutions, Feng said.

Philadelphia Energy Solutions now sells the cumene to Honeywell, Feng said. A Honeywell spokesman declined to confirm the purchase for competitive reasons.

The terminal includes eight cumene storage tanks with a total capacity of 164,000 barrels and two benzene storage tanks with a total capacity of 58,000 barrels, along with the ability to unload benzene from trucks, railcars and barges at the facility, the company disclosed in a federal filing last month announcing the sales of shares in its transportation assets.

The company just finished work on a rail project that will allow it bring up to 210,000-bpd of Bakken crude oil to the refinery. The crude oil from North Dakota is less expensive than Brent and is credited with helping revitalize the local refining industry.

The crude-oil unloading system is expected to become the main asset of PES Logistics Partners LP, a master-limited partnership whose main customer will be the refinery. The benzene terminal is not part of the partnership, but PES Logistics has the first right of refusal to buy it and several other assets, according to the filing.

The benzene terminal is on the south side of the facility, while the crude oil terminal is on the north side, according to the two people familiar with the plant's operation.

A company spokeswoman declined to comment on the benzene plant, citing the pending asset sale.

(Reporting By Jarrett Renshaw; editing by Jessica Resnick-Ault and Grant McCool)

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