* Refinery to cease operations in April, begin conversion
* Joins raft of refineries converted into terminals
Jan 8 Tesoro Corp's 93,500 barrel per
day (bpd) Kapolei, Hawaii, refinery will become the seventh
Western Hemisphere plant since 2009 to be shuttered and
converted to an import, storage and distribution terminal, the
company said on Tuesday.
Tesoro had been marketing the refinery with the goal of
cutting a deal to sell it by the end of last year.
"The number of potential buyers was not many to start with,"
said Al Troner, president of Houston-based Asia Pacific Energy
"It comes down to the idea that you have a distant, small
market without much potential to expand. Eventually the futility
of the facility does not bear putting any more investment into
Tesoro said it expects to take a one-time charge between $1
and $1.10 per share in the fourth quarter. Analysts' average
per-share forecast for the fourth quarter was $1.51, according
to Thomson Reuters I/B/E/S.
The company also said in an announcement that it expects to
realize between $300 million and $350 million in cash by the end
of 2013 on a reduction in working capital needs due to the
The Hawaii refinery imports all the crude oil the firm needs
to make motor fuels for the local market.
Six other refineries in the Western Hemisphere have
converted to terminals since 2009. Like the Tesoro refinery,
they were unable to lower their crude oil costs as demand failed
in the recession that began in 2008.
Tesoro said the Kapolei plant will cease refining operations
STILL LOOKING TO LEAVE
Converting the Hawaii refinery to a terminal also moves it
into midstream logistics, a growing source of profit for
"That's no surprise, they're dropping it into the
midstream," said David Hackett, president of Stillwater
Associates, a West Coast energy consultancy. "That's where the
Midstream, which includes terminals and pipelines, operates
on a fee-based model that's not exposed to rapid swings in
feedstock prices and demand.
But Tesoro signalled it wants to eventually leave Hawaii.
"Tesoro Hawaii will maintain the existing distribution
system to support marketing operations and fulfill its supply
commitments while continuing to offer the terminal, distribution
and retail assets for sale," the company said.
Tesoro owns 29 retail stations in Hawaii, which it will
continue to operate.
Chevron Corp. operates a 54,000 barrel per day
refinery in Ewa Beach, Hawaii.
A Chevron representative did not reply to a request for
comment about Tesoro's plans for its Hawaii operations.