Jet fuel yields well below targets at Delta refinery

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Delta Air Lines' Trainer oil refinery is producing jet fuel in amounts well below the targets it laid out when it bought the plant last year.

Modifications to maximise production will allow the Atlanta-based carrier to increase output to 40,000 barrels per day of jet fuel by early 2014, says Ed Bastian, president of Delta, at the Bank of America Merrill Lynch 2013 Global Transportation Conference on 15 May. This equates to 21.6% of the refinery's 185,000 barrel per day capacity.

This is well below the up to 32% jet fuel yield target - about 59,000 barrels per day - that Delta laid out when it bought the Pennsylvania refinery from Phillips for $180 million June 2012. It invested another $100 million in upgrades to the plant last year.

These targets have been widely questioned. The US Energy Information Agency (EIA) said that the estimates were higher than "previously seen at Trainer and significantly above the average yield of jet fuel in any US refining region", in a June 2012 report.

The agency cited data that shows an average jet fuel yield of 11% at refineries in the continental USA in 2011. It noted that some plants produced yields between 25% and 29% during a few months of the year.

Delta declines to comment on current production rates or why Trainer is producing jet fuel yields below expectations.

Bastian's comments are not the first time that statements by the carrier's executives have shifted. Paul Jacobson, chief financial officer of Delta, said in April that no decisions had been made regarding long-term investments at Trainer when asked about rail offloading facilities. This was a step back from his statement last December that the airline planned to "invest in offloading capabilities to be able to accept crude by rail" that would be operational by the end of 2013.

Delta has had unforeseen difficulties with Trainer. The plant was on-track to a successful start-up when superstorm Sandy disrupted production and supply lines after it hit the US east coast on 29 October 2012. This resulted in the facility posting a $63 million loss during the fourth quarter.

Trainer lost an additional $22 million in the first quarter, despite having recovered from the disruptions, executives said in April.

"They expected a lot and going into the last two quarters," says Anna Matherne, a markets reporter for Flightglobal sister publication ICIS who has been following Delta's acquisition of Trainer.

"Things were looking alright [and] then the hurricane happened and other things they couldn't control," she says. "Maybe they're being a little more cautious with their projections."

Bakken crude oil will total about 10% of its crude inputs at Trainer by the end of the year, says Bastian at the conference. He says that this will save the airline money by allowing it to buy crude at the price of Brent crude or minus a small margin.

Delta pays Brent plus a small margin for its non-Bakken crude supplies today, the majority of which comes from west Africa.

"We're very very pleased with what we've seen to date," says Bastian. He did not comment on current production levels or how Trainer is performing compared to the airline's initial estimates.

Note: An earlier version of this article said Delta bought Trainer for $280 million