Delta Air Lines wholly-owned subsidiary, Monroe
Energy, has reached agreement with Conoco downstream spinoff
Phillips 66 to acquire the 185,000 bpd Trainer refinery complex
south of Philadelphia.
As part of the transaction, Delta will enter into strategic
sourcing and marketing agreements with BP and Phillips 66, it
The acquisition includes pipelines and transportation assets
that will provide access to the delivery network for jet fuel
reaching Delta's operations throughout the Northeast, including
its hubs at LaGuardia and JFK in New York.
After receipt of $30 million in state government assistance
for job creation and infrastructure improvement from the
Commonwealth of Pennsylvania, Deltas investment to
acquire the refinery will be $150 million.
Delta said it would spend $100 million to convert the
existing infrastructure to maximize jet fuel production.
Production at the refinery combined with multi-year
agreements to exchange gasoline, diesel, and other refined
products from the refinery for jet fuel will provide
80% of Delta's jet fuel needs in the US, according to the
"Acquiring the Trainer refinery is an innovative approach
to managing our largest expense," said Richard Anderson,
"This modest investment, the equivalent of the list price of
a new widebody aircraft, will allow Delta to reduce its fuel
expense by $300 million annually and ensure jet fuel
availability in the Northeast.
Delta says it is partnering with leading energy companies to
supply crude oil and receive jet fuel in exchange for Trainer's
non-jet fuel outputs.
Under a three-year agreement, BP will supply the crude oil
to be refined at the facility. Delta will exchange gasoline and
other refined products from Trainer for jet fuel from Phillips
66 and BP elsewhere in the country through multi-year
The Commonwealth of Pennsylvania and Delaware County also
agreed to provide assistance to ensure the refinery continues
its economic contribution to the region.
"By working with world class partners like BP and Phillips
66, we can benefit from their expertise in energy sourcing and
product distribution," said Ed Bastian, Delta's president.
"We are also pleased to partner with Governor Corbett and
the Commonwealth of Pennsylvania, the Pennsylvania
Congressional delegation, and Delaware County to create jobs
and economic growth for the region while generating substantial
fuel savings for Delta, he added.
"This supply and off-take agreement demonstrates BP's
continued commitment to supply US customers with the feedstock and products they
need, said Paul Reed, CEO of integrated supply and
trading for BP. We are delighted to bring BP's global
scale and access to the world's energy markets to this
strategic agreement with Delta.
Trainer will be run by a leadership team headed by 25-year
refinery veteran Jeffrey Warmann. In his last position as
refinery manager for Murphy Oils Meraux, La. refinery,
Warmann led Meraux's restructuring efforts, increasing refinery output by more than 30% and
significantly improving profitability.
Delta expects to close on the acquisition in the first half
Jet fuel production is expected to begin during the third
quarter, and changes to the plant infrastructure to increase
jet fuel production would be complete by the end of the third
quarter, resulting in expected 2012 fuel savings of more than
"We expect the Trainer acquisition to be accretive to
Delta's earnings, expand our margins, and to fully recover our
investment in the first year of operations," said Paul
Jacobson, Delta's chief financial officer. "We look forward to
closing this transaction and moving quickly to begin capturing
Located on the Delaware River in Trainer, Pa., about 10
miles southwest of downtown Philadelphia, the Trainer complex
has a crude oil processing capacity of 185,000 bpd and
processes mainly light, low-sulfur crude oil.