ACA.refinery.012.052419

The Delek U.S. Krotz Springs refinery in Krotz Springs laid off an undisclosed number of workers last week as it looks for ways to turn a profit and still plans to invest millions in maintenance work at the plant.

An oil refinery in St. Landry Parish laid off an undisclosed number of workers last week as it looks for ways to turn a profit and still plans to invest millions in maintenance work at the plant.

The Krotz Springs oil refinery, owned by Tennessee-based Delek U.S. and built in 1976, had about 210 workers before the coronavirus pandemic caused lockdowns eight months ago that sapped demand for fuel for travel and work commutes. 

It was also not clear Monday how many workers the company still has in Louisiana. Delek officials told investors last week the company planned to lay off 8% of its workforce to save money. That would mean trimming roughly 300 workers of its 3,800 employees company-wide. About 1,300 worked in refining as of December 2019. Delek has refineries of similar size to Krotz Springs in Tyler, Texas; Big Spring, Texas; and El Dorado, Arkansas.

The Krotz Springs refinery, acquired by Delek U.S. in 2017 from Alon Refining, has the capacity to process 80,000 barrels of crude oil each day. It was not clear how much production has been cut since the economic recession began. 

If the 8% staff reduction is evenly distributed, it would mean 16 employees lost their jobs in Krotz Springs. However, the company told investors it plans to idle unprofitable units at Krotz Springs that account for the majority of its products processed there.

The company did not respond to repeated requests for comment.

The profit margin for gasoline has diminished since the coronavirus pandemic and prompted other refineries across the country to idle some operations or even shutter. The Krotz Springs refinery also produces jet fuel, high-sulfur diesel, liquefied petroleum gas, isobutane, polygas, a blending fuel used in liquid fertilizers, naptha and propylene. Some of these petrochemical products are more profitable than others, but the volume is significantly lower than gasoline and jet fuel. 

The Krotz Springs refinery generated $70.5 million in annual sales as of December 2019, largely split between gasoline and jet fuel, with 35,000 barrels and 28,000 barrels, respectively, according to U.S. Securities and Exchange Commission records. Petrochemicals accounted for less than 5,000 barrels of daily capacity in 2019, records show.

Delek U.S. told investors last week it plans to reorganize the business, but still invest $10 million in the Krotz Springs operation during fourth quarter for completion by first-quarter 2021, which is pushing the maintenance and turnaround work back by a few months. 

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"Depending on market conditions, we have the flexibility to optimize operations at Krotz Springs by operating only the units that are producing favorable margins, thereby reducing unnecessary operating expenses or moving back to full utilization at the facility should macro environment margins improve," Ezra Uzi Yemin, CEO of Delek U.S., said in a news release. 

Delek U.S. had a net loss of $88.1 million in the third quarter. Of that, its refining business lost $17.8 million. Its profit margin on gasoline, known as a crack spread, was down 58% from one year ago. The business expects to reduce its capital expenditures by 40% across the company and streamline operations at the Krotz Springs refinery to improve its cash flow by $200 million in 2021. 

In April 2019, the company spent $138 million to build an alkylation unit, which added "additional flexibility" at the refinery and it was supposed to help make it less dependent upon crack spreads. In May 2019, Delek U.S. estimated it would spend $150 million at the Krotz Springs site over a five-year time frame and add 30 new jobs. At the time, the company was offered a performance-based state grant up to $7.5 million over a four-year period for infrastructure improvements to its dock terminal at the Port of Krotz Springs in addition to the Industrial Tax Exemption and Quality jobs programs. 

Meanwhile, Calcasieu Refining nearby Lake Charles, which was built in 1977, has idled operations at its 128,000 barrel per day operation and is laying off dozens of workers by the end of the year. Royal Dutch Shell is closing its Convent facility, which opened in 1967 and has capacity up to 211,100 barrels each day. It employs 700 Shell workers and 400 contract workers.

Only a few crude oil refineries have been built since 2000, nearly all of which are in Texas and range between 25,000 barrels of crude oil each day to 60,000 barrels, according to the Energy Information Administration.

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Email Kristen Mosbrucker at kmosbrucker@theadvocate.com.