PBF Energy 2012 Annual Report Download - page 62

Our operating cost structure is also important to our profitability. Major operating costs include costs
relating to employees and contract labor, energy, maintenance and environmental compliance. The predominant
variable cost is energy, in particular, the price of utilities, natural gas and chemicals.
Our operating results are also affected by the reliability of our refinery operations. Unplanned downtime of
our refinery assets generally results in lost margin opportunity and increased maintenance expense. The financial
impact of planned downtime, such as major turnaround maintenance, is managed through a planning process that
considers such things as the margin environment, the availability of resources to perform the needed maintenance
and feedstock logistics, whereas unplanned downtime does not afford us this opportunity.
Refinery-Specific Information
The following section includes refinery-specific information related to crude differentials, ancillary costs,
and local premiums and discounts.
Delaware City Refinery. The benchmark refining margin for the Delaware City refinery is calculated by
assuming that two barrels of the benchmark Dated Brent crude oil are converted into one barrel of gasoline and
one barrel of heating oil. We calculate this refining margin using the New York Harbor market value of gasoline
and heating oil against the market value of Dated Brent crude oil and refer to the benchmark as the Dated Brent
(NYH) 2-1-1 benchmark refining margin. Our Delaware City refinery has a product slate of approximately
52.5% gasoline, 35% distillate (split evenly between ULSD and heating oil), 1.5% high-value petrochemicals,
with the remaining portion of the product slate comprised of lower-value products (5% petroleum coke, 5%
LPGs and 1% other). For this reason, we believe the Dated Brent (NYH) 2-1-1 is an appropriate benchmark
industry refining margin. The majority of Delaware City revenues are generated off NYH-based market prices.
The Delaware City refinery’s realized gross margin on a per barrel basis has historically differed from the
Dated Brent (NYH) 2-1-1 benchmark refining margin due to the following factors:
• the Delaware City refinery processes a slate of primarily medium and heavy, and sour crude oil, which has
constituted approximately 70% to 80% of total throughput. The remaining throughput consists of sweet
crude oil and other feedstocks and blendstocks. In addition, we are currently processing a significant volume
of price-advantaged crude. Our total throughput costs have historically priced at a discount to Dated Brent;
and
• as a result of the heavy, sour crude slate processed at Delaware City, we produce low value products
including sulfur and petroleum coke. These products are priced at a significant discount to gasoline, ULSD
and heating oil and represent approximately 5% of our total production volume.
Paulsboro Refinery. The benchmark refining margin for the Paulsboro refinery is calculated by assuming
that two barrels of the benchmark Dated Brent crude oil are converted into one barrel of gasoline and one barrel
of heating oil. We calculate this refining margin using the New York Harbor market value of gasoline and
heating oil against the market value of Dated Brent crude oil and refer to the benchmark as the Dated Brent
(NYH) 2-1-1 benchmark refining margin. Our Paulsboro refinery has a product slate of approximately
37.5% gasoline, 40.5% distillate (comprised of approximately one-third jet fuel and two-thirds heating oil),
5.5% high-value Group I lubricants, with the remaining portion of the product slate comprised of lower-value
products (4% petroleum coke, 3% LPGs, 3% fuel oil, 5% asphalt and 1.5% other). For this reason, we believe the
Dated Brent (NYH) 2-1-1 is an appropriate benchmark industry refining margin. The majority of Paulsboro
revenues are generated off NYH based market prices.
The Paulsboro refinery’s realized gross margin on a per barrel basis has historically differed from the Dated
Brent (NYH) 2-1-1 benchmark refining margin due to the following factors:
• the Paulsboro refinery has generally processed a slate of primarily medium and heavy, and sour crude oil,
which has historically constituted approximately 70% to 80% of total throughput. The remaining throughput
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