Isle refinery may face cuts


POSTED: Wednesday, March 10, 2010

The Chevron refinery in Hawaii will not be converted to a storage terminal as previously considered, but remains part of the company's global restructuring plan.

That plan includes cutting up to 2,000 jobs this year, Chevron Corp. announced yesterday. About 200 of Chevron's 300 Hawaii employees work at the Campbell Industrial Park refinery, one of two in the state.

Chevron said in May that it was considering shutting down the Hawaii refinery and converting it into a fuel storage terminal. That plan is now “;off the table,”; and Chevron will operate the facility “;in its current form,”; said company spokesman Lloyd Avram.

The company is still conducting additional evaluations to increase its returns in Hawaii.

Executives of the second-largest U.S. oil producer are still deciding where and when they will eliminate the jobs as they try to complete the restructuring by the third quarter, Avram said. Additional cuts are expected next year.

“;Hawaii is part of that restructuring,”; Avram told the Star-Bulletin. Right now “;we have no more details to share.”;

The refinery has the capacity to process 54,000 barrels a day. The other Hawaii refinery, owned by Tesoro Corp., can process 94,000 barrels a day.

The job cuts represent almost 12 percent of Chevron's 17,000 workers in the so-called downstream part of its business and just more than 3 percent of its overall work force.

Chevron said it also will seek bids for the Pembroke refinery in southwestern Wales in the U.K. and fuels marketing, aviation and lubricants businesses in the Caribbean and some markets in Central America.

Refineries, which turn crude into gasoline, diesel and other fuels, struggled amid rising oil prices and falling demand last year. In addition, new refineries are being built.

“;Downstream conditions are likely to be difficult for the next several years,”; Mike Wirth, executive vice president of Chevron's global downstream business, said in a statement.

Argus Research analyst Phil Weiss said he believes Chevron is making the right move, but he questions whether the producer will get a good price for the assets in the difficult business environment.

Major oil companies worldwide have battled weak demand that cuts into profits at refineries.

Royal Dutch Shell recently said it would cut an additional 1,000 jobs this year, mostly at its refining operations.

France's Total SA said Monday that it will end refining operations at its plant in Dunkirk, France, in response to falling demand.

In the fourth quarter, Chevron lost $613 million in its refining operation compared with a $2 billion profit in the year-ago quarter.

The company has said it will reduce spending by $1 billion this year on downstream businesses, which include refining, marketing and transportation.

Chevron wants to focus its downstream portfolio in North America and the Asia-Pacific region, and is shifting its production toward natural gas and Asian assets.

In addition to seeking bids for the Pembroke refinery and for fuels marketing, aviation and lubricants businesses in the Caribbean and Central America, Chevron said it is reviewing refinery operations in Hawaii and other undisclosed operations outside South Africa, Avram said.

Chevron, based in San Ramon, Calif., said severance charges are expected to range from $150 million to $200 million on an after-tax basis in the first quarter.

It laid off 1,900 employees in downstream operations last year.

Shares of Chevron closed down 34 cents yesterday at $74.30.

The Associated Press contributed to this report.