PBF Energy 2013 Annual Report Download - page 62

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Credit Risk Management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial
loss to us. Our exposure to credit risk is reflected in the carrying amount of the receivables that are presented in
our balance sheet. To minimize credit risk, all customers are subject to extensive credit verification procedures
and extensions of credit above defined thresholds are to be approved by the senior management. Our intention is
to trade only with recognized creditworthy third parties. In addition, receivable balances are monitored on an
ongoing basis. We also limit the risk of bad debts by obtaining security such as guarantees or letters of credit.
Other Factors
We currently source our crude oil for Paulsboro and Delaware City on a global basis through a combination
of market purchases and short-term purchase contracts, and through our crude supply agreements with Statoil and
Saudi Aramco. Our crude supply agreement with Statoil for Paulsboro was terminated effective March 31, 2013,
at which time we began to source Paulsboro’s crude oil and feedstocks internally. Our crude supply agreement
with Statoil for Delaware City has been extended by Statoil through December 31, 2015 and we have recently
entered into certain amendments to that agreement that are effective through the extended term. In addition, we
have a contract with the Saudi Arabian Oil Company (“Saudi Aramco”) to purchase crude oil, and also purchase
on the spot market from Saudi Aramco when strategic opportunities arise. We have been purchasing up to
approximately 100,000 bpd of crude oil from Saudi Aramco that is processed at Paulsboro. Our Toledo refinery
sources domestic and Canadian crude oil through similar market purchases through our crude supply contract with
MSCG. We believe purchases based on market pricing has given us flexibility in obtaining crude oil at lower prices
and on a more accurate “as needed” basis. Since our Paulsboro and Delaware City refineries access their crude
slates from the Delaware River via ship or barge and through our rail facilities at Delaware City, these refineries
have the flexibility to purchase crude oils from the Midcontinent and Western Canada, as well as a number of
different countries.
During 2012, we expanded and upgraded the existing on-site railroad infrastructure at the Delaware City
refinery, including the expansion of the crude rail unloading facilities that was completed in February 2013 and is
capable of discharging approximately 110,000 bpd, consisting of 40,000 bpd of heavy crude oil and 70,000 bpd
of light crude oil. However, due to greater operating efficiency, discharge capacity for light crude oil at our dual-
loop track at the Delaware City refinery has increased from 70,000 bpd to approximately 105,000 bpd. In
conjunction with the development of our rail crude unloading facilities at Delaware City, we constructed a railcar
storage yard with capacity for 330 railcars that is integral to railcar staging and storage and helps facilitate daily
rail traffic at the refinery. Also in 2013 we commenced a third rail crude offloading project to add an additional
40,000 bpd of heavy crude rail unloading capability at the refinery, which is expected to be completed by the
second half of 2014. Completion of this third rail project will increase our discharge capacity of heavy crude oil
from 40,000 bpd to 80,000 bpd and bring the total rail crude unloading capability up to 185,000 bpd. As a result
of our crude rail unloading facility expansion, the delivery of coiled and insulated railcars, the development of
crude rail loading infrastructure in Canada and the use of unit trains, we expect to be capable of taking delivery
of approximately 80,000 bpd of Canadian heavy crude oil at the Delaware City refinery by the end of 2014. We
are also adding additional unloading spots to the dual-loop track to increase unloading capabilities at that facility
to approximately 130,000 bpd. Completion of these additional rail projects will increase our discharge capacity of
heavy crude oil from 40,000 bpd to 80,000 bpd and bring the total rail crude unloading capability up to 210,000
bpd by the end of 2014, subject to the delivery of coiled and insulated railcars, the development of crude rail loading
infrastructure in Canada and the use of unit trains.
During 2012 and January 2013, we have entered into agreements to lease or purchase 5,900 crude railcars
which will enable us to transport this crude to each of our refineries. Of the 5,900 crude railcars, we recently
purchased 717 railcars, and subsequently sold them to a third party, which has leased the railcars back to us for
periods of between four and six years. This transportation flexibility allows our East Coast refineries to process
the most cost advantaged crude available.