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Should refineries delay maintenance?
Report: Some push back scheduled work due to short gasoline supplies, but there are safety risks.
September 28, 2005: 9:55 AM EDT
A Port Arthur, Texas, refinery damaged by Hurricane Rita.
A Port Arthur, Texas, refinery damaged by Hurricane Rita.

NEW YORK (CNN/Money) - The nation's oil refiners face pressure to defer maintenance on facilities to make up for supplies of gasoline lost from hurricane damage, but such delays pose their own risks, according to a published report.

While high gas prices have produced wide profit margins for refineries, there are safety and operational risks involved in not performing scheduled maintenance, according to a report Wednesday in The Wall Street Journal.

"Most people believe that the longer you let these things go, the more likely you are to have something go wrong," Jacques Rousseau, an analyst at Friedman, Billings Ramsay Group, told the Journal.

The need for refining capacity is particularly acute right now as four refineries are still not operating due to damage caused by Hurricane Katrina. Four others remain shuttered from Katrina, with eight others trying to restart operations following Hurricane Rita. About 20 percent of U.S. refining capacity is now out of service, according to the newspaper.

The newspaper reports that Valero Energy (Research) says it intends to put off any maintenance that can be safely deferred to continue producing as much fuel as possible. Tesoro Corp. (Research) is forgoing maintenance at its Golden Eagle refinery near San Francisco until the first quarter of 2006, though the company says that decision was made some time ago.

Still other companies are going ahead with maintenance plans, according to the newspaper. ConocoPhillips (Research) is scheduled to begin maintenance Thursday on its plant in Roxana, Ill.

The newspaper reports that there is a risk of accidents that can cause serious safety and operational problems if needed maintenance is not performed. Last week, BP (Research) agreed to pay workplace-safety regulators $21.4 million in fines for safety violations tied to a deadly March 23 explosion at its Texas City, Texas, plant, the newspaper reported.

The Journal said investigators charged that BP officials were aware that repairs were necessary but opted to delay them until after the unit's start-up. BP agreed to pay the fines without admitting to the alleged violations, according to the report.

"You've got to weigh the economic benefits and the pressure to produce against what's prudent and safe," Doug MacIntyre, an analyst with the government's Energy Information Administration, told the newspaper.

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For more news on the oil crunch caused by this year's hurricanes, click here.  Top of page

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