March 25, 2019 / 6:51 PM / 4 months ago

UPDATE 3-Lyondell Houston, Shell Deer Park refineries cut production -sources

(Updates prices; adds Lyondell statement)

HOUSTON, March 25 (Reuters) - Two Houston Ship Channel oil refineries cut production on Monday due to a shutdown of that waterway to clean up a chemical spill, said sources familiar with operations at those plants.

Lyondell Basell Industries cut production by 14 percent at its 263,776 barrel per day (bpd) Houston refinery, the sources said.

Royal Dutch Shell Plc reduced production at its 275,000 barrel-per-day (bpd) Deer Park refinery, a 50-50 joint-venture with Mexico’s national oil company Pemex , due to a shortage of crude supply, the sources said.

The sources did not know by how much production was cut back at the Deer Park refinery, but added that some units are on circulation, which takes them out of production but keeps them at operating temperatures for a quick return to production.

The sources also said rail car loading had stopped and at least one unit in the Deer Park chemical plant had been idled.

Cash prices for U.S. Gulf Coast A2 CBOB gasoline rose 2.75 cents a gallon to a 1.50-cent discount under New York Mercantile Exchange RBOB futures, which gained 1.20 cents a gallon at $1.9379.

Lyondell cut production because it cannot use barges to remove sulfur produced in the making of motor fuels and has limited storage capacity on site, the sources said.

“Lyondell Basell’s Houston refinery remains operational; however, we are experiencing constrained barge and vessel logistics capabilities,” said company spokeswoman Chevalier Gray, who declined to discuss the status of individual units.

Shell spokesman Ray Fisher said operations were stable at the Deer Park refinery, which is next to the site of a fire last week at Intercontinental Terminals Co (ITC), a unit of Mitsui & Co Inc, last week.

Shell shut a 35,000-bpd vacuum distillation unit (VDU) on Friday night, according to energy industry intelligence service Genscape. VDUs refine residual crude from atmospheric distillation units.

A dam failed on Friday at the ITC petrochemical tank farm, allowing chemicals from the eleven 80,000-barrel tanks containing gasoline-blending components that burned to spill into the channel.

The U.S. Coast Guard shut the channel to contain and clean up the spill. On Monday afternoon, the Coast Guard reopened the channel with restrictions.

As of Monday morning, 60 ships were waiting to enter or exit the ship channel.

Refineries and chemical plants in Texas City, Texas, at the southern end of the channel were not affected by the closure. (Reporting by Erwin Seba, additional reporting by Stephanie Kelly; Editing by Jeffrey Benkoe and Marguerita Choy)

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