Oil-by-rail role planned for Paulsboro refinery

The new owners of the former NuStar Asphalt refinery in Paulsboro plan to upgrade the Gloucester County facility to take advantage of the growing cross-country shipments of crude oil by rail.

Axeon Specialty Products L.L.C., the new name adopted this week by the San Antonio company that operates the refinery, says it intends to make "new, substantial investments" in its 70,000-barrel-a-day operation in Paulsboro, including new rail unloading facilities.

The Paulsboro plant now can receive only a small number of railcars at one time, said Rod Pullen, a senior vice president at Axeon SP. The aim is to add more unloading capacity so that Axeon can order cost-efficient unit trains - 100-car trains that carry a single commodity to a single destination.

More crude is moving by rail from booming domestic oil fields, but the transportation method has come under scrutiny after several recent accidents that caused explosions. A train carrying heavy crude to the Paulsboro NuStar refinery derailed in Western Pennsylvania on Feb. 13, causing a spill but no fire.

The Axeon Paulsboro plant is the smallest of five Delaware River refineries. Its main business is processing heavy crude oil into asphalt used in paving and roofing. It sourced most of its crude oil by sea until recently, when it began receiving rail shipments of cheaper bitumen extracted from Canadian oil sands.

Lindsay Goldberg, a New York private-equity firm that has been operating the refinery in a joint venture with NuStar Energy since 2012, bought out NuStar's interest this month. Pullen said the new owners want to transform the seasonal asphalt refinery into more of a flexible, year-round oil-processing business.

The refinery's two petroleum refining units can convert about 60 percent of a barrel of heavy crude into asphalt but are not equipped to make higher-value products. The refinery now sells the remaining material to more sophisticated refineries that can process the by-product into fuel.

Axeon SP is reconfiguring one of two petroleum refining units at the plant to process lighter crude oil, allowing more off-season production opportunities, Pullen said. It is also studying the feasibility of adding a hydrotreater to the site, which would allow Axeon to convert some petroleum into low-sulfur diesel.

The Paulsboro facility was built in 1972 and operated as Seaview Petroleum Co. until it was acquired by Venezuela's Citgo Petroleum in the 1990s. NuStar Energy bought it in 2008.

Axeon SP also owns a 30,000-barrel-a-day refinery and terminal facility in Savannah, Ga.

215-854-2947 @Maykuth