KAPOLEI, OAHU (HawaiiNewsNow) - Tesoro Corp. said today that it will shutdown the state's largest refinery in April, resulting in the loss of nearly 200 jobs.
Tesoro made the announcement after no significant buyers emerged for the 94,000-barrel per day refinery. It will leave Hawaii with just one refinery, Chevron Corp's 54,000-barrel per day plant, also in Kapolei.
"The closing of the Kapolei refinery, one of only two refineries in Hawaii, is terrible news for the state and the workers who will lose their job because of this action," U.S. Sen. Mazie Hirono said.
Tesoro informed its employees about the shutdown during a noontime meeting at the Kapolei refinery. The company said it would plans to convert the refinery into an import and storage complex that to ship in already refined gasoline from the Mainland and Asia.
Tesoro also said it will sell its 32 retail gasoline stations in Hawaii separately.
"The plant is going to turn into a terminal. It's going down. So for all the Tesoro workers I feel bad. They're losing their jobs," said contract worker Jason Kaneao, who attended the meeting.
When it first announced it was pulling out of Hawaii more than a year ago, Tesoro said it was confident it could find a buyer for the refinery by June 2012. But that date was pushed back several times as a deal became more and more elusive.
In filings with the Securities and Exchange Commission, Tesoro said the refinery was making money but that it was one of its least profitable plants.
The company said the shutdown will free up $300 million, cash that the company can invest elsewhere or can return to its investors.
Sources say that local interests and a number mainland investment firms and trading companies from Japan and other foreign companies looked at buying the refinery but none were willing to invest tens of millions of dollars in a refinery.
Most of these bidders, sources said, were more interested in Tesoro's gasoline stations and its distribution network.
"People are unwilling to spend huge amounts of money here for a market that is not growing," said Fereidun Fesharaki, chairman of the FACTS Global Energy, a leading petroleum consulting firm.
"Tesoro is a very competent and capable refiner. If it was making economic sense, they would keep it themselves."
Sources say that Tesoro officials informed Hirono and other members of Hawaii's Congressional delegation about the shutdown earlier this week. Mark Wilson, Tesoro's vice president of regional development, also met with state officials late yesterday.
State officials also met last month with competitor Chevron at the company's San Ramon, Calif. headquarters, according to people familiar with the talks.
There, both sides discussed the potential impact of a Tesoro shutdown and whether the state could meet consumer demand through gasoline imports and slightly increased production from Chevron's refinery, the sources said..
As a result of its inquiries, the state had concluded that the state won't see a significant gasoline supply disruption.
In a statement issued today, Gov. Neil Abercrombie said the closure underscores Hawaii's need to reduce its dependence on imported fossil fuels.
"The 21st Century has arrived when it comes to energy and the importation of oil," he said.
"The changing petroleum landscape underscores the urgency for the state of Hawaii to move rapidly on meeting our Hawaii Clean Energy Initiative objectives."
Along with the potential impact on motorists, the Tesoro shutdown affects a wide range of businesses in Hawaii. Hawaiian Electric Co. relies on Tesoro for fuel it uses to make electricity and commercial airlines use the jet fuel produced by the company.
The Department of Defense is also a major customer.
Meanwhile, Tesoro said it will fulfill its supply commitments and proceed with the shutdown with as little disruption as possible.