CORRECTED - CORRECTED-(OFFICIAL)-UPDATE 1-Tesoro: Fewer overhauls scheduled

(Corrects after company clarified that maintenance turnaround costs will be lower in the second half because most overhauls were done in the first half of the year)

By Erwin Seba

HOUSTON, July 30 (Reuters) - Independent western U.S. refiner Tesoro Corp (TSO.N) said refinery maintenance turnaround costs would be lower in the second half of 2008 as it contends with high oil prices and declining gasoline demand that's eroding the company's profits.

The San Antonio-based refiner reported net earnings in the second quarter of $4 million, compared to $443 million a year ago.

Tesoro said the turnaround costs would be lower because most of the planned work at its refineries was completed in the first half of the year.

Tesoro also plans to run cheaper crudes at its two California refineries while matching its production to consumer demand, said Chairman and Chief Executive Bruce Smith in a statement on second-quarter results.

Meanwhile, leading U.S. refiner Valero Energy Corp (VLO.N) reported a 67 percent cut in earnings on Tuesday and said it was cutting back production and capital spending at its refineries.

Integrated oil companies like ConocoPhillips (COP.N) have been able to parlay record-high oil prices into record profits, while pure refiners like Tesoro and Valero have seen their profits fall as the cost of acquiring crude to feed their units soars.

Smith did not say refinery production levels were cutback as Tesoro he did a quarter ago.

"Our opportunities in this type of environment lie in identifying and executing self-help initiatives such as effectively matching production and inventory levels to consumer demand, optimizing product mix towards more profitable diesel fuel and less discounted fuel oil, and reducing expenses," Smith said.

Tesoro's seven refineries ran at an average combined throughput of 610,000 barrels per day (bpd) in the second quarter, the company said. The refineries have a combined crude oil refining capacity of 660,000 bpd.

The refineries ran an average 184,000 bpd of heavy crude oil and 388,000 bpd of light crude in the second quarter.

Production at the 166,000 bpd Golden Eagle refinery in Martinez, California, was reduced during the second quarter as a new coking unit was connected to the refinery.

That unit will allow the refinery to process lower cost crudes, Smith said.

Also, the company's 100,000 bpd Los Angeles refinery will rely on cheaper waterborne crudes rather than California crudes, he said.