UPDATE 2-Tesoro sees refineries running below capacity in Q3

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HOUSTON, July 30 (Reuters) - Independent western U.S. refiner Tesoro Corp (TSO.N) said its six refineries may run at 83.3 percent of their combined capacity of 660,000 barrels per day in the third quarter of this year as the company weathers low demand and higher crude oil costs.

Tesoro reported a second-quarter loss of $45 million, or 33 cents per share, in the second quarter, as heavy crude discounts dissipated and demand for motor fuels languished in the throes of a global economic downturn.

In California, the nation's largest motor fuel market, the decline may be over.

"I think we're beginning to see a flattening of the decline rate," said Chuck Flag, senior vice president of system optimization, during a Thursday conference call to discuss second quarter results.

"In other words, demand for clean products is roughly flat," Flag said. "It appears we've seen a little bit of improvement on the gasoline side. However, the distillates are probably roughly equal to slightly negative from where they were year to year."

Tesoro's total system throughput in the third quarter is planned to be between 550,000 and 590,000 bpd. In the third quarter of 2008, Tesoro's total throughput was 622,000 bpd.

Tesoro has no planned refinery unit overhauls in the third quarter, said Chairman and Chief Executive Bruce Smith.

The projected run rates do include unplanned hydrocracker repairs wrapping up at Tesoro's 166,000 bpd Golden Eagle refinery in the San Francisco Bay town of Martinez, California.

Mechanical work on the hydrocracker has finished, said Dan Porter, senior vice president of refining, during the call. The unit should be back in service in less than a week.

Tesoro's two California refineries are planned to run between 235,000 and 245,000 bpd in the current quarter, below their combined capacity of 266,000 bpd.

The San Antonio company's Hawaii refinery is expected to run between 60,000 and 70,000 bpd, below capacity of 95,000 bpd.

Tesoro's Pacific Northwest refineries, which include a plant in Alaska, are planned to run between 150,000 and 160,000 bpd, below the combined capacity of 187,000 bpd.

Refineries in North Dakota and Utah are expected to run between 105,000 and 115,000 bpd, below their combined capacity of 118,000 bpd.

The company expects to spend slightly less than $600 million on capital projects for the year. (Reporting by Erwin Seba; Editing by John Picinich)