Jobs will be lost as Hawaii goes from 2 refineries to 1

Updated: Aug. 30, 2018 at 7:51 AM HST
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KAPOLEI, OAHU (HawaiiNewsNow) - Jobs will be lost, but the number is uncertain, as a result of Island Energy Services deciding to get out of the refinery business.

Par Pacific, operator of the larger, ex-Tesoro refinery in Kapolei, will buy some refining elements from Island Energy, owner of the smaller, ex-Chevron refinery, also in Kapolei.

Par expects to hire perhaps 65 of the appropriately 150 people Island Energy lays off. These numbers are estimates, however.

Both companies own scores of gas stations and intend to keep and develop those networks.

Although Costco has occasionally brought in a tankerload of gasoline that was refined somewhere else, the lion's share of petroleum consumed in Hawaii, often 100 percent, is refined here from tankerloads of crude. Indeed, by some measures, Hawaii's biggest export is jet fuel, because it's refined in Hawaii, then loaded onto jets some of which then fly to other countries.

The Island Energy Services refinery holds the contracts to supply low-grade power plant fuel to all the state's electric utilities.

"We believe this transaction will prevent any disruption to the supply of fuel to meet Hawaii's electric generation needs," said Par CEO William Pate. "As the owner and operator of Hawaii's remaining refinery, we recognize our role in meeting the essential demand for petroleum products today."

Island Energy Services says the deal is for $45 million — plus the sale of some stored fuels — and will provide capital to improve its storage tanks, pipelines and docking facilities.

"We recognize the impact this transaction will have on all of our employees and we are committed to supporting each of them during this transformation of the business," IES CEO Jon Mauer said.

The deal is expected to close by year's end.

Hawaii is a unique oil products market for several reasons. It's small, which affects profit margins and deters competition.

It's leading the nation is switching to non-fossil fuels. It has the stability of the U.S. government being a major local consumer of jet fuel. And commercial airlines also need jet fuel, for which there are fewer alternative fuels so far.

This uniqueness extends to the retail sector, where gasoline prices are elevated by the cost of the land on which gas stations sit.

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