* Gasoline and distillates will be sold in Bakersfield
* First phase of possible multiphase project
NEW YORK, Feb 14 Alon USA Energy Inc (ALJ.N)
has begun to reconfigure its 68,000 barrel-per-day Bakersfield,
California, refinery as a stand-alone vacuum gas oil
hydrocracker with startup expected in June, a company spokesman
said on Monday.
The Bakersfield hydrocracker will run VGO produced at the
company's 85,000-bpd Paramount refinery in Long Beach,
California, and produce gasoline and distillates for the
The reconfiguration will result in a 55 percent yield in
distillates at the refinery.
This is the first phase of a potential multiphase
reconfiguration at Bakersfield as Alon seeks to find other ways
to maximize returns on the Bakersfield refinery it bought out
of bankruptcy in 2010.
The combined Paramount-Bakersfield refinery will will
produce 35 percent distillates, 35 percent asphalt and 30
percent gasoline when the work is completed in June, a
"The future growth of gasoline demand is negative," said
the spokesman, in explaining why Alon was increasing its
distillate yields at the expense of gasoline.
Alon bought the Paramount refinery in late 2006 to support
its growing asphalt business in Southern California, knowing
that at the time the plant was a simple hydroskimming refinery.
Paramount produced intermediate (unfinished) products, finished
distillates (diesel and kerosene) and asphalt.
Throughout 2007-2009, Alon worked with engineering
companies to come up with a way to upgrade those unfinished
products into higher-valued finished gasoline and diesel, but
the price tag of $600 million was too steep to build a new unit
at the refinery, so plans were shelved.
Then, Alon bought the Bakersfield refinery from Flying J
Corp in 2010 and the company began looking at ways to integrate
it into its West Coast refining system, said the spokesman.
In the new configuration, Alon will ship the unfinished
intermediates, primarily VGO, by rail and/or truck to
Bakersfield to run through the hydrocracker. Alon is currently
hiring 100 employees to work at the refinery site in
The finished gasoline and distillate will be sold in the
Bakersfield region, rather than being shipped back to Los
Angeles, since Bakersfield products sell at a premium to Los
Angeles refined products. Alon will garner "slightly less than
50 percent of the Bakersfield market share" once the unit comes
online, said the spokesman.
Alon decided that continuing to run the crude unit at
Bakersfield was not viable, since it was configured to run
locally-produced San Joaquin Valley crude, production of which
is subject to a 15 percent annual decline rate.
Alon is also looking at pipeline options for moving the VGO
to Bakersfield, and may move in that direction in the future,
but for now, the use of rail cars and/or trucks looks like the
best option for the company.
Beside the Paramount-Bakersfield refining complex, Alon
also owns refineries in Big Spring, Texas, and Krotz Springs,
(Reporting by Jeffrey Kerr; editing by Jim Marshall and