Delta interested in buying an oil refinery?

[HalinTexas]

Little difference between Kerosene, #1 diesel and Jet A from a refining standpoint, although they are not necessarily interchangeable.

DAL maybe looking for some control over the retail (refined) price of Jet A, not so much as an investment opportunity. If they are the largest customer for Jet A, they can get it for cost, effectively and without getting into detail, and sell the rest. If they can get cheaper (or less volatile) price on Jet A and their refinery doesn't lose money, they win. Hopefully, this isn't a boon-doggle.

 

[JimNtexas]

Most MBA's would say that an airline has no business buying an oil refinery, since that's out of their 'core competence'. Conventional wisdom is to just have marketing and finance in the US, outsource software and customer contact to India, hardware to China. Hire on 1099s. Take no risks.

But then I look at SpaceX, who outsources almost nothing and is able to make rocket ships at a cost substantially less than even China can match.

It may be that Delta is right to bring more of its costs under its own roof after all.

And I don't buy the 'it's impossible because nobody has done it' argument.

 

[redflyer65]

And I don't buy the 'it's impossible because nobody has done it' argument.

I completely agree. I say..


Full Steam Ahead.

 

[Andy]

Little difference between Kerosene, #1 diesel and Jet A from a refining standpoint, although they are not necessarily interchangeable.

Thank you! I was tempted to post that in response to JimNTexas' original question. The biggest difference from a refinining standpoint is that Jet A has a slightly shorter carbon chain than diesel.
I don't know all of the additives that are put in each after refining but diesel isn't going to need the same amount of FSII as Jet A. And from reading others' posts, it appears that Jet A doesn't have as many lubricant additives as diesel. This article confirms additional lubricant additives in diesel fuel: http://www.ehow.com/facts_5808896_difference-jet-fuel-diesel-fuel_.html

Both Jet A and diesel can be refined from heavy or light crude.

The problem with heavy crude is that it has a longer carbon chain than light crude so that it requires more refining than light crude.

As to the wisdom of an airline acquiring a refinery, I'll defer to those in the oil industry. http://www.foxbusiness.com/industries/2012/04/06/is-refinery-ownership-key-to-airline-fuel-woes/

 

[redflyer65]

Excellent article Andy. I find it really interesting that people who actually run and operate refineries like these are losing money....and have been doing it for years, on these very sites.

Part two of the story...no other operators want them either. I would say that makes it a questionable venture at best..

Theoritically speaking, if Delta did buy the refinery how would they change of equation of it still being a money loser? These refineries require light sweet crude. There is none in the area. Maybe they have a different plan, could be interesting to watch if they pull the trigger.

 

[Dan Roman]

Funny, as an outsider looking in I was going to say I see it the other way around.

Then I read the second part of your post, and see that it is not just as I see it but it is fact.

An outsider looking in? Your whole focus on here is pro SWA and trying to make DAL RJ pilots look like inexperienced rookies trying to steal mainline flying. You are obviously a SWA pilot in the same vain as Tankerclown, that version of SWA pilot tried to make Air Force tanker pilots look like idiots while he attacked DAL.

As was said, the whole "my airline can beat up your airline" crap is juvenile and pretty much makes pilots on here appear to be over grown kids who would struggle in the real world.

 

[Dan Roman]

Nice to see all the experts on oil refining on here, you guys may have missed your calling.
I heard SWA is going to retaliate by buying a peanut factory to keep costs down?

 

[Freebrd]

What is all this ******************** against Delta from the SWA guys on this forum. hand.

Go wayyyyyy back and you'll see that weenie Jenny Leigh and the other one, OysYoYo started slamming SWA in addition to stirring it up on the regional board as well. PUTZ!

 

[redflyer65]

An outsider looking in? Your whole focus on here is pro SWA and trying to make DAL RJ pilots look like inexperienced rookies trying to steal mainline flying.QUOTE]

I'd say he's probably getting tired of being treated like a second class citizen at Mother Delta and my see a pretty big difference if hired at SW.

Oh, and he admits he didn't steal anything, he thanks you for the outsourced flying. Food on the table and all that stuff.

Full Steam Ahead Gentleman!

 

[ASADFW7]

Please debate the topic.

 

[KNOTS]

Thank you! I was tempted to post that in response to JimNTexas' original question. The biggest difference from a refinining standpoint is that Jet A has a slightly shorter carbon chain than diesel.
I don't know all of the additives that are put in each after refining but diesel isn't going to need the same amount of FSII as Jet A. And from reading others' posts, it appears that Jet A doesn't have as many lubricant additives as diesel. This article confirms additional lubricant additives in diesel fuel: http://www.ehow.com/facts_5808896_difference-jet-fuel-diesel-fuel_.html

Both Jet A and diesel can be refined from heavy or light crude.

The problem with heavy crude is that it has a longer carbon chain than light crude so that it requires more refining than light crude.

As to the wisdom of an airline acquiring a refinery, I'll defer to those in the oil industry. http://www.foxbusiness.com/industries/2012/04/06/is-refinery-ownership-key-to-airline-fuel-woes/

Jet fuel has lots of additives.. including things that are added to make it less likely to explode in a crash....http://www.youtube.com/watch?v=Y33N0raKZBo (test footage of fuel additive added)

 

[Andy]

Jet fuel has lots of additives.. including things that are added to make it less likely to explode in a crash....http://www.youtube.com/watch?v=Y33N0raKZBo (test footage of fuel additive added)

Thanks; I didn't look at all of the additives in each fuel (Jet A vs diesel) because JimNTexas' question centered on the difference in Jet A vs diesel from a refinining standpoint. The basics of refining can be found here: http://science.howstuffworks.com/environmental/energy/oil-refining.htm

 

[SWA GUY]

The problem with the Trainer Facility(former Sunoco, now Conoco-Phillips) is that its a Brent plant and not a WTI plant.

Brent is about $20/bbl higher in price than WTI. Brent crude contains loads of sulfur which makes the refining process even more expensive, and that's on top of the $20/bbl difference.

This plant can be converted at considerable cost, but whomever buys it is going to have to steal it to make it worthwhile. And its a long shot that the new owner, if there is a change in ownership, can make any money with it.

*This analysis comes from a former Fortune 100 Oil company CEO, and the current CEO/Owner of the largest privately held LPG import business in the US(I'd say he has a pretty good handle on this).

Advice to DAL: Be careful what you wish for.

 

[HalinTexas]

Just be wary if DAL buys McDonald's to refine the frier grease.

 

[Scoot 11]

As was said, the whole "my airline can beat up your airline" crap is juvenile and pretty much makes pilots on here appear to be over grown kids who would struggle in the real world.

Pretty sad and pathetic isn't it. Funny part is, that one of the mods is a SWA pilot, so he lets the DAL bashing go on, but censors the SWA bashing.
Pathetic indeed...........................

 

[outerlimits]

Deleated

 

[dicko]

I always wondered what John Ross Ewing (JR Ewing's son) did after he grew up at South Fork,
Godspeed!

The OYSter

Disregard. Somebody already explained the 'magic picture box' to OYS.

 

[Crash Pad]

This is why airlines should never make money. Give Delta a couple profitable quarters and they lose their damn minds. Buying 717's, oil refineries, next it will be that condo American had in London. Airlines are so unfamiliar with profits it becomes Brusters millions.

 

[On Your Six]

The problem with the Trainer Facility(former Sunoco, now Conoco-Phillips) is that its a Brent plant and not a WTI plant.

Brent is about $20/bbl higher in price than WTI. Brent crude contains loads of sulfur which makes the refining process even more expensive, and that's on top of the $20/bbl difference.

This plant can be converted at considerable cost, but whomever buys it is going to have to steal it to make it worthwhile. And its a long shot that the new owner, if there is a change in ownership, can make any money with it.

*This analysis comes from a former Fortune 100 Oil company CEO, and the current CEO/Owner of the largest privately held LPG import business in the US(I'd say he has a pretty good handle on this)

Advice to DAL: Be careful what you wish for.

DAL uses Brent Crude in their calculations, not WTI. Since it is a Worldwide airline, Brent covers the bases for fuel all over the World. Also, I have a feeling the company has looked into this carefully. If they are interested, there is probably a good reason. The CEO you mentioned maybe enjoys over charging airlines, and could be threatened by other CEO's "thinking outside the box." And, ancillary revenues for the 3rd quarter last year alone totalled $841 million for the airline. So, this probably isn't a move of desperation. If it happens, there is probably a good reason for it.



Godspeed!


The OYSter

 

[SWA GUY]

OYS,

Sounds like you and DAL have it all figured out. Good luck!