UPDATE 1-Chevron's Richmond refinery likely to close -paper
* $1 bln upgrade of S.F. area refinery halted last July
* Columnist says Chevron looked at refinery sale last year
* Chevron hopes to continue Richmond operations -spokesman
* Refinery has 240,000 bpd capacity, ranked 21st in U.S. (Adds Chevron spokesman's comments, industry background, details on Richmond refinery)
SAN FRANCISCO, Jan 20 (Reuters) - Chevron Corp (CVX.N) is likely to close its oldest refinery, in Richmond, California, in a wider restructuring of downstream operations, the local newspaper's business editor wrote in a column on Wednesday.
The second-largest U.S. oil company halted work on a $1 billion upgrade of Richmond last July after a state judge ordered it, agreeing with environmentalists who brought a lawsuit that the refinery's environmental impact report was incomplete. The company later filed an appeal. [ID:nN20122859]
Chevron said on Tuesday it planned to cut refinery jobs and exit some markets, and the Contra Costa Times business editor, Drew Voros, expects details to be unveiled in March to include the closure of the 108-year-old refinery.
"If Chevron had been allowed to complete the retrofit in Richmond, there would be a strong fiscal argument to keep it open. Instead, there is a strong fiscal argument to close it," Voros concluded in his column for the paper, serving the county that is home to Richmond and Chevron's San Ramon headquarters.
Chevron spokesman Lloyd Avram said the company had not yet made any announcements on assets, jobs or markets.
"We've operated in Richmond for more than 100 years, and we would hope to continue operating," he said of the San Francisco Bay refinery, which has capacity to refine more than 240,000 barrels of crude a day, ranking it 21st in the United States.
A Richmond closure would be only the latest response by refiners to a devastating squeeze on margins due to demand weakened by the economy, coupled with high crude oil prices.
Leading U.S. refiner Valero Energy Corp (VLO.N) said in November it would close its plant in Delaware City, Delaware, three months after indefinitely shutting its Aruba refinery. Sunoco Inc (SUN.N) has idled its plant in Eagle Point, New Jersey.
Chevron said last week it expected to report sharply lower refining earnings for the fourth quarter, and highlighted a $4 drop in U.S. West Coast refining margins.
Stricter regulations in California, in particular, historically have contributed to relatively fatter margins for refined products in the state, but the West Coast premium over the U.S. Gulf Coast disappeared last quarter.
Chevron's largest U.S. refinery is on the Gulf Coast, in Pascagoula, Mississippi, while its second-largest is about 400 miles down the coast from Richmond, in El Segundo, California.
Voros cited sources at Chevron who said last year that the company had talks with Chinese buyers who would have dismantled and shipped the Richmond refinery to China, while the land would be kept as an offloading facility for refined products.
Just this month, larger rival Royal Dutch Shell Plc (RDSa.L) said it would transform its Montreal East refinery into a fuel terminal.
Richmond sits at the southern end of a water artery that gives tankers direct access from the Pacific Ocean to smaller refineries in Rodeo, owned by ConocoPhillips (COP.N); Benicia, owned by Valero; and Martinez, where one is owned by Shell and the other by Tesoro Corp (TSO.N). (Reporting by Braden Reddall, editing by Gerald E. McCormick)