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Squawks & HeadlinesDelta starts jet fuel production at Pa. refinery

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Delta starts jet fuel production at Pa. refinery

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Delta Air Lines Inc's 185,000-barrel-per-day refinery in Trainer, Pennsylvania, has begun producing jet fuel, a source familiar with the situation said on Monday. (af.reuters.com) More...

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Number1Mom
De Crockett 3
This is refreshing! A business practice which is the exact opposite of "outsourcing", and it takes "in sourcing" to a new level. It's one way to fix things and get what you want how and when you want it.
zcolescott
Zachary Colescott 3
Will be interesting to follow this model and see what happens in the coming couple of years...
preacher1
preacher1 3
What will really be interesting is how they put Monroe Energy on the books. If it is listed as a full, for profit company, it's hard to see how DAL will realize any fuel savings. If they bring it down to a cost+ operation they stand a chance to realize the full savings potential. Either way, I am like De, it is good to see something happen here by not only buying the refinery, but in the future switching to the Bakken crude rather than North Sea or Africa.
sparkie624
sparkie624 1
Either way, I wish them well with it.
hgdelgado
Hernan Delgado 1
Hurrah for Delta!!!
mhlansdell00
Mark Lansdell 1
@ chalet:

Not to worry. Double cross and the other oil companies will keep them in line and then just follow the exchange agreements. The world is fast out growing the need for heavy fuel oil with the conversion from steam to diesel. Little of industry other than military uses 4 and 6 oil any more, and natural gas is becoming more and more plentiful. As for the heavy ends like asphalts, the shingle factories use most of it and double cross led the way to make plastic pipe and other products. Exxon has retracted their refining over the years and their storage and terminal operations too. Baltimore was a huge facility with deep water service and it was just finally demolished as was Chevron's asphalt refinery in the same city. I think the market is there for the residual "stuff" as long as they play nice with the other oil companies.
jettinpecker
art thompson 1
Oh Boy.. I'd settle for a bag of peanuts..
Yazoo
Yazoo 1
Delta purchased the operation for about the cost of one 737-900. Delta is the largest private purchaser of fuel in the world. Second to the US military. They spend about $12B annually on fuel. This has the potential to produce about 85% of their jet fuel needs. More that the fuel, it allows Delta to have a little control over the crack spread. Previously, they were at the mercy of the gulf coast oil producers (cartels). Even if it turns bad, the risk is well worth the price.
bboaze
Bruce Boaze 1
Aren't there more refinereries for sale, or being shut down?
chalet
chalet 1
If they bought it for $ 50 million it is because it is worth far less than that so no basement bargain here. Oil refining is a terribly complicated business, first you have to line up crude supplies such from Bakke, West Texas, Brent, Bonny Light or even heavier stuff from Venezuela. Secondly this refinery as any other also produces other products that Delta does not need but it has to find buyers for on long term/spot basis such as motor vehicle gasoline, probably naphtha, diesel No. 5 or 6 and then the messy bottoms all further distracting management from the airline operation.
Yazoo
Yazoo 3
From the articles that have been put out on this the oil is already under contract. Plus the by products you mention have already been contacted to be traded for jet fuel at other than Northeast locations."... Monroe signed a three-year deal with BP Plc (BP.L) to supply crude oil to the facility. Under a product-offtake deal, Monroe will exchange gasoline and other refined products from Trainer for jet fuel from Phillips 66 and BP elsewhere in the country through multi-year agreements."

They didn't buy it for $50M. they bought it for $130M of which $30M was put up by the state of PA to secure jobs. They planned to put $100M in upgrades and have increased the jet fuel output fro 14% to 32%. $200M is about the cost of a widebody aircraft.
With the swap deal it will provide about 80% of their jet fuel needs. They will continue to purchase fuel and hedges.

It is a gamble but a calculated one. The payoff still worth the risk.
preacher1
preacher1 1
Well, like I said below, to agree with you and your friends, it will either be the biggest fiasco anyone has ever seen, or they will do well with it. I don't think there will be any middle ground. Only time will tell.
preacher1
preacher1 1
There probably are but I doubt anybody will do anything else toward this until they see how DAL does with this and you can bet there will be people watching.
mhlansdell00
Mark Lansdell 1
Not disagreeing, it's hard to fathom that they burn more than the refinery can produce. That plant was geared for light ends. Sun Oil, down the street in Claymont, Delaware was a bottling plant for engine oil only a few years ago. Last time I was through there it appeared as though they were cracking again. Hard to keep up with.

I sure hope it works out for them. I'd like to hear a success story for a change.
bboaze
Bruce Boaze 0
Maybe this is what a Romney run US Government would do. Sell the GM stock back to GM and buy $50 billion of refineries for the biggest user of jet fuel.
Lapetomane
William Lapetomane 0
Any chance that demon richard Anderson could drink a few barrels of this oil and do the planet a favor and just evaporate ? I hope this is his undoing
chalet
chalet 0
Friends in the oil business tell me that this is one of the most ill-conceived "in-sourcing" propositions ever. Delta knows zilch about the oil refining business as conversely ConocoPhilips is absolutely a Zero in the airline business. One lingering problem: how would Delta handle a disturption or stoppage at the refinery: well, buy fuel on the spot market which can be 20-25% maybe higher than what their own refinery products cost so in a few weeks the savings, if any, will go up in smoke. "You should stick to the racket you know" is one of maxims you listen the first day at any MBA school.
preacher1
preacher1 2
I also got to chime in here, Chalet. They obviously got somebody with their Monroe Energy side that knows somthing about Oil. As the 2nd largest consumer, they must "think out of the box". As far as supply disruption, they are getting out of that world market and going to the Bakken as a source rather than overseas, and apparently a backup of West Texas. Only time will tell and in a year or so, if it all works out, those same naysayers will be lauding it as one of the best decions ever made. Only time will tell.
Number1Mom
De Crockett 2
Maybe, but it's that same MBA school of thought that helped get us into this mess with "Let's go Global" and everyone should own a home!
bboaze
Bruce Boaze 2
More like, everyone should pay the most they can afford "monthly" for a home.
mhlansdell00
Mark Lansdell 1
I don't think they should depend on Saudi oil. If Iran goes crazy then DAL is up the creek. Shop with the friendlies.
mhlansdell00
Mark Lansdell 1
Karl, In support of your point, look at Mr. Smith and FedEx. It can't possibly work. Billions of dollars later, it's still working.
AWAAlum
AWAAlum 1
Diversification rocks
preacher1
preacher1 1
And working real good. The curdmudgeons in Little Rock still cry over that one and there are enough of the ones that were around at that time to say I told you so, AND WE DO!!!!!!!
Fred's roots were in Southeast AR and the Delta, so he was just as comfortable at MEM as LIT. He did actually try harder and do his utmost to put it at LIT, but MEM reached out their arms and it was like old home week.
mhlansdell00
Mark Lansdell 1
I never heard the LIT part of the story.
preacher1
preacher1 1
Not much to it. Same as what they are talking about above. He tried to take it to LIT first. The Airport laughed at him as well as the city. At that time(I think they still do) Arkansas had what they called Act 9 Industrial bonds which had all kinds of incentive and didn't really cost anybody anything except the actual borrower, but a municipality had to pass a resolution for a company to get them. LIT wouldn't and Pulaski county deferred because it was in the city. It would have been beautiful, what with Dassault-Falcon right there on field(still there BTW). But, Fred and others like him believed in their ideas and the results are there. I remember a TV commercial a few years back over some kind of industry thing down here, and it was bemoaning the status quo thinking and they used FedEx as an example, showing Fred himself driving a FedEx van leaving LIT and getting off the Istate in MEM. I think DAL will do good on this deal if they handle it right and it sounds they are.
mhlansdell00
Mark Lansdell 1
Thanks for filling in missing parts.

I think DAL can pull this off too, if the bean counters and legal eagles set it all up correctly and the management can keep a lid on their enthusiasm, and not get too greedy.

Boy was that a terrible sentence.
AWAAlum
AWAAlum 1
A man of few sentences but many words. lol
preacher1
preacher1 1
Sentence may have been terrible but it speaks the truth and that's what matters.lol
mhlansdell00
Mark Lansdell 1
My grade school English teacher would be ashamed of me
preacher1
preacher1 1
Obviously, you don't care much for him.
bboaze
Bruce Boaze 1
Bla, bla bla bla.
mhlansdell00
Mark Lansdell 1
It seems to me that if it's set up properly, neither division has to know much about the other other than their needs. The right management would treat DAL like a marketing customer rather than an airline partner.If DAL can buy fuel for cost plus they are happy. It will be up to the bean counters how they keep score.

It's my understanding that Jet fuel is a close cousin to kerosene, #2 fuel/diesel.Somebody correct me please.
JetMech24
JetMech24 1
You can think of jet fuel, diesel, and kerosene as triplets, so to speak. Jet fuel and kerosene are the 2 out of the triplets that are almost identical twins. If you get my meanings. :)
preacher1
preacher1 1
Everyone speaks of just Disel. Not really well known is that there is a #1 and #2 dieseli. #2 diesel is what most folks speak of nowadays when they say diesel as is a heavier. The #1 diesel is just about like kerosene. Really not even sure if it's still out there. They may have pulled it to stop the confusuion. Too many engines just burnt down as it was so hot.
Tim5712
Tim Duncan -1
Hats off to Delta for capitalism. Maybe they should have gotten a government loan and glued solar panels to the airplanes . As they say in business "No risk, no reward". Delta is a great airline and I hope they are successful in this venture.