PhillyInc: With Sunoco move, a setting sun for refining in Phila. region

A year ago, I took a boat ride up the Schuylkill to the Fairmount Water Works.

To reach that elegant, neoclassical structure below the Philadelphia Museum of Art, you must first pass a sprawling South Philadelphia complex that was designed to quench a different thirst for a once rapidly industrializing nation.

On that summer day, the sounds, smells, and flashes emanating from the metal city that is Sunoco Inc.'s refinery overwhelmed the quietude of the trees and greenery that line much of the river's western bank. Puttering along at 5 to 10 m.p.h., the boat took nearly 10 minutes to pass what is no mere monument to Philadelphia ingenuity, but the living embodiment of its role in the global oil business.

Since the 1860s, oil has been refined along the Schuylkill by various companies. Today, Sunoco Philadelphia is the biggest of the 10 refineries that operate on the East Coast, with a capacity to handle 335,000 barrels of crude daily. That's more than 100,000 barrels per day more than the second-largest, ConocoPhillips Bayway in Linden, N.J.

With Sunoco's announcement Tuesday that it will exit the refining business as of July 2012, however, we are staring at the sunset of refining, not only in the city but the region as a whole.

Sure, Sunoco may find a buyer for the 1,400-acre complex, where about 850 full-time employees and 175 contractors work, as well as its refinery on the Delaware River in Marcus Hook, which Sun Oil Co. founder Joseph N. Pew started in 1902. (Marcus Hook employs more than 600 full-timers and 250 contractors.)

Still, the company has not had

a nibble for the 178,000-barrel- per-day Eagle Point refinery in West Deptford that it shut down in November 2009, costing 400 employees their jobs.

There are real drawbacks to running a $37.49 billion business with refineries that have so much history. Over the last two decades, Sunoco has tried to upgrade its area refineries to keep pace with the growing complexity of petroleum refining, spending nearly $1 billion in South Philadelphia alone.

It hasn't been enough to improve the Sunoco refineries' operational reliability or profitability.

First, the kind of crude oil processed by Sunoco's two refineries is priced off costly European Brent crude rather than the cheaper West Texas Intermediate crude. The spread between the two has been as wide as $26 per barrel this year, and Sunoco refineries cannot process lower-quality crudes.