Fire Strikes Third Largest U.S. Refinery
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Mar 31, 5:06 AM (ET)

By Erwin Seba

HOUSTON (Reuters) - An explosion and fire rocked a BP oil refinery in Texas, the third-largest in the United States, on Tuesday, driving gasoline prices to an all-time high and unnerving currency markets worried about security threats.

BP (BP.L) said there was no sign of "any outside influence" in the blast and fire, which came days after the U.S. Federal Bureau of Investigation warned Texas oil refiners of possible terror attacks ahead of elections in November.

The cause of the fire, which began with an explosion in the gasoline-producing unit at the 447,000 barrel-per-day (bpd) refinery in Texas City, Texas, was not known, but it did not appear to have been started intentionally, BP said.

"We have no indication of any outside influence on the incident," said company spokeswoman Annie Smith.

BP has been maintaining high security at its Texas refinery after the FBI warning on March 25 of an unsubstantiated threat of an attack.

No injuries were reported due to the explosion and fire, which began around 6:30 p.m. CST (0030 GMT Wednesday), and all plant personnel were accounted for, Smith added. A BP spokesman in London later said the fire was out by 11:00 p.m.

Television reports showed flames jumping over 50 feet in the area, lighting up the night sky across Texas City, located 30 miles south of Houston.

Flames could be seen up to two miles away at the start of the blaze. A state highway and streets leading to the refinery were blocked off by police to prevent exposure to the hydrocarbon smoke and residents were instructed to stay indoors.

The rest of BP's Texas City refinery and chemical complex continues to operate normally, Smith said. The London spokesman said it was too early to say what impact on future output the fire might have.

NERVOUS MARKETS

BP and other Texas refiners said last week they had heightened their security since the Sept. 11, 2001 attacks on New York and Washington, D.C. and were constantly on watch for possible threats.

Some traders said security fears prompted by the explosion might have triggered the latest dollar fall and helped boost the Swiss franc, traditionally seen as a safe haven.

U.S. unleaded gasoline futures hit an all-time high on Wednesday after the fire, which also revived worries of a motor fuel supply crunch in the peak demand summer months.

Front-month April gasoline on the New York Mercantile Exchange charged to a record $1.1768 a gallon, surpassing a May 2001 record at $1.1750, before easing to $1.1700 a gallon.

In Asian and early European trading, crude oil prices climbed on the back of gasoline strength, and oil company shares led stock markets higher.

Traders said the explosion and fire had eclipsed events at this week's meeting of the producer cartel OPEC in Vienna.

"The impact (of the blast) is much bigger than OPEC because U.S. gasoline demand is expected to be strong this year while inventory levels are low," said Tony Nunan, manager at the international petroleum business of Mitsubishi Corp.

Operations at other refineries in Texas City were unaffected by the BP fire.

Valero Energy Corp. spokeswoman Mary Rose Brown said the company's 210,000-bpd refinery about a mile from the BP complex was operating normally, though emergency crews were standing by to assist BP firefighters.

Marthon Ashland Petroleum also operates a 72,000 bpd refinery in Texas City, which is on the Texas Gulf Coast.



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