PBF Energy 2013 Annual Report Download - page 63

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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, and renewable fuel credits,
known as RINs, required for compliance with the Renewable Fuels Standard. 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 53.5%
gasoline, 32.5% distillate (consisting of ULSD, marketed as ULSD or low sulfur heating oil, and conventional
heating oil), 1% high-value petrochemicals, with the remaining portion of the product slate comprised of lower-
value products (5% petroleum coke, 5% LPGs and 3% 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 65% to 70% 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 5.5% 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% gasoline, 41%
distillate (comprised of jet fuel, ULSD and heating oil), 5.5% high-value Group I lubricants, with the remaining
portion of the product slate comprised of lower-value products (3% petroleum coke, 4% LPGs, 3% fuel oil, 6%
asphalt and 0.5% 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 65% to 70% of total throughput. The remaining throughput
consists of sweet crude oil and other feedstocks and blendstocks. We are now also running a significant volume
of price advantaged domestic crudes. These feedstocks historically have priced at a discount to Dated Brent;