Billings Refinery
Exxon shipping Bakken crude by rail* Refinery margins hurt by maintenance at Joliet* Billings, Montana refinery running at reduced ratesBy Selam GebrekidanNEW YORK, July 28 (Reuters) - Exxon Mobil Corp (XOM.N: Quote), thelargest U.S. refiner, said on Thursday it is in hot pursuit ofcrude oil from U.S. shale prospects and Canadian oilfields toboost earnings from its downstream business.The company has started shipping oil from the Bakkenprospect in the North Dakota plains to its refineries, it saidin a second-quarter earnings call.The refiner is the latest to turn to railcars to ship crudefrom the booming oilfields in North Dakota. Others such asTesoro Corp (TSO.N: Quote) have also used railcars to send Bakkencrude to their West Coast and Midwest refineries.[ID:nN1E76E0FW] Production in the state has tripled over the past fouryears and reached slightly more than 360,000 barrels per day(bpd) in May.Higher U.S. output in states such as North Dakota andCanadian crude imports have created a supply glut at Cushing,Oklahoma, leading to the U.S. benchmark West TexasIntermediate's deepening discount against world benchmarkBrent.The spread between U.S. and Brent crude rose to as much as$23.57 in mid-July.Exxon said it was processing an increasing amount of"advantaged crude" priced against cheaper WTI in its refineriesfrom Canada all the way south in the Gulf Coast.The company, which operates the 238,600-bpd Joliet,Illinois refinery, has been in an ideal position to exploitunprecedented margins created by the record WTI-Brent spread."To the extent we are able to get those (U.S. shale andCanadian crudes) and run them into our refining circuit, we arecertainly doing so," David Rosenthal, Exxon vice president forinvestor relations, said.Rosenthal added that changes in Exxon refineries' feedstockhad resulted in better volume-mix gains in the second quarter.MIDWEST DOLDRUMSNonetheless, the company said second-quarter downstreamearnings, up $136 million from the same period last year and$257 million higher than the first quarter, had been hurt byincreased refinery maintenance costs."We did see some nice margin improvement in the UnitedStates ... but that was offset by some maintenance activitiesin our Midwest refinery in Joliet," Rosenthal said.Exxon had reported multiple problems at unspecified Jolietprocessing units in May, which at one point led to a huge18-cent jump in Chicago gasoline differentials in the cashmarket. [ID:nWEN3585]Joliet was not the only headache Exxon faced in the Midwestin the second quarter. The company's 69-mile (110-km) Silvertippipeline, which feeds its 60,000 bpd Billings refinery inMontana, ruptured over the Independence Day weekend and spilled42,000 gallons of light sweet crude into the Yellowstone River.Exxon said the Billings refinery continued to operate atreduced rates but the company was seeking alternative ways tosupply crude to the plant."We have begun some preliminary work on replacing thepipeline, including discussions on permitting requirements andthat sort of thing," Rosenthal said.Rosenthal declined to say when operations would return tofull rates at the Montana refinery.Exxon on Thursday reported a higher quarterly profit thatmissed Wall Street estimates as maintenance slowed itsinternational refining and production, and its shares closeddown 2 percent. [ID:nN1E76Q1J6](Editing by Dale Hudson)