By Kristen Hays
HOUSTON, Nov 7 (Reuters) - Alon USA Energy Inc plans to shut down its California refineries for a year due to high costs of imported oil, further cutting the state’s already depleted capacity to make fuel.
Chief Executive Paul Eisman said on Wednesday Alon intends to restart the 94,000 barrel per day system, which comprises three plants in Bakersfield, Paramount and Long Beach, in the fourth quarter of 2013 at the earliest.
Timing of the restart will depend on the completion of a facility to bring in rail-delivered crude produced in the U.S. Midcontinent, which would be cheaper than importing crude. The plant will also be reconfigured to run the crude, which will yield less asphalt and boost profits.
Low asphalt demand have weighed on margins, Eisman said.
“Midcontinent crude oils are lighter than our West Coast alternatives and will produce less asphalt,” Eisman said. “This improves our refining economics and allows us to run more crude in any given asphalt demand scenario,” he told analysts during the company’s third-quarter earnings conference call.
California gasoline prices surged last month as refinery problems - including an August fire at Chevron’s Richmond refinery - reduced fuel supplies to the state, which is largely disconnected from other U.S. regions due to a lack of pipelines.
Eisman said that in the longer term, Alon has its eye on replacing rail-delivered oil with increased production from California’s Monterey shale play.
Roger Read, an analyst with Wells Fargo Securities, said in a note to investors that idling the California refineries should make Alon’s operations more stable, though he noted that shut facilities bring in no cash.
Alon’s Long Beach facility and the Paramount facility, which produces asphalt, shut down last month and the Bakersfield plant is currently shutting down, Eisman said.