UPDATE 1-Chevron's Richmond refinery likely to close -paper

Wed Jan 20, 2010 2:10pm EST

 * $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
 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)