Hawaii's largest oil refinery is closing, precisely as we predicted it would and Abercrombie is openly cheering the closure as heralding the arrival of "the 21st Century":
January 5, 2013: LNG Report: HCEI Goals not Compatible With Refining in Hawaii
Although HCEI goals alone would change the size and pattern of demand in 2030 (a demand barrel with more than 70% middle distillates) such that it would not be compatible with a healthy Hawaii refining industry, the situation would be much worse for the refineries as we add another 25-30 kb/d demand cut by introducing LNG into our energy system.
January 25, 2012: Abercrombie to Tesoro: Drop Dead
Tesoro’s January 10, 2012 announcement that it was seeking a buyer for its Hawaii refinery drew a two-fold response in Governor Neil Abercrombie’s State of the State speech:
“we must lessen our dependence on imported oil,” and “Our Department of Labor and Industrial Relations stands ready to provide job assistance for those who need it.”
The message to any buyer looking at Tesoro’s Kapolei refinery is clear. Abercrombie is suggesting Tesoro might close the refinery instead of selling it. And by declining to offer any goodwill from the State, the Administration is doing what it can to promote closure—or discourage a buyer who does not meet the proper political criterion. Politically incorrect buyers can expect nothing but obstruction from the State.
SB 2006: Will Tesoro Closure Cause Asphalt Shortage?
GOVERNOR’S STATEMENT REGARDING TESORO HAWAII REFINERY (He doesn’t even try to hide his glee.)
News Release from Office of the Governor January 8, 2013
HONOLULU – Gov. Neil Abercrombie responded to today’s announcement by Tesoro Hawaii that the company will convert its 94,000-barrel per day crude oil refinery to a terminal, effectively ending the facility’s refinery operations. Tesoro Hawaii distributes refined products statewide in the form of gasoline, diesel, jet fuel, ship fuel, asphalt and fuel oil for electrical generation.
Gov. Abercrombie stated:
“After a good faith effort to continue current refining operations, Tesoro Hawaii has determined that it is in its own best business interests to convert its Hawaii refinery into a terminal facility.
“We have offered to work with Tesoro Hawaii in exploring remaining options and achieving an orderly transition for its employees and the state’s energy needs.
“The 21st Century has arrived when it comes to energy and the importation of oil. The changing petroleum landscape underscores the urgency for the State of Hawaii to move rapidly on meeting our Hawaii Clean Energy Initiative objectives. Essential to our economic recovery is taking control of our state’s energy future. We currently send billions of dollars a year outside of our islands to meet our energy needs.
“This administration is seeking long-term infrastructure investments that ensure our electric grids are stable, reliable and modern enough to integrate all available alternative and renewable energy technologies.”
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TESORO TO CONVERT HAWAII REFINERY TO AN IMPORT, STORAGE AND DISTRIBUTION TERMINAL
News Release from Tesoro
SAN ANTONIO, TX - January 08, 2013 - Tesoro Corporation (NYSE: TSO) today announced that it will cease refining operations at its Kapolei refinery during April of this year, and begin the process of converting the refinery to an import, storage and distribution terminal. Tesoro Hawaii is committed to maintaining its focus on safe and environmentally sound operations during the shutdown and conversion process.
Tesoro Hawaii will maintain the existing distribution system to support marketing operations and fulfill its supply commitments while continuing to offer the terminal, distribution and retail assets for sale. Upon conversion of the refinery to an import, storage and distribution terminal, Tesoro Hawaii believes third party utilization of the terminal and associated logistics will facilitate ongoing supplies of refined products.
Tesoro expects to report one-time charges in the fourth quarter 2012 related to the conversion of the refinery to a terminal, including charges for asset impairment and asset retirement obligations. The one-time charges are estimated to be $1.00 - $1.10 per share. The Company also expects to realize between $300 million and $350 million in cash by the end of 2013, driven by a reduction in working capital needs as a result of this conversion.
Tesoro Closure Means Less Self-Determination for Hawaii
HNN: "In normal circumstances, there would be no problem, because there are plenty of refined products in the global market. But if there is a global issue in terms of supply, then of course, if you have to buy the products, it's more difficult," said Fereidun Fesharaki, an energy expert who works for FACTS Global Energy, a consulting group.
So now, Hawaii will rely on refined fuel from the mainland or Asian markets much more than before.
"To be dependent on another source for it takes away from a little bit of our self-determination in Hawaii," said Barney Robinson, who owns two Chevron dealerships in Nuuanu and Waialae "We're going to rely on places that are far away and something may happen over there that may have an impact here in Hawaii. So, yeah, that's probably not a good thing."
"The immediate effects aren't going to be known until we actually get there and see how the supply is going to be impacted and where our new sources are going to be coming from and all those factors will determine whether it's going to go up or down or stay the same," Robinson.
Experts said Hawaii fuel prices here will be impacted by crude oil prices on the West Coast more than before
read … No immediate gas price hike expected after refinery closure
HNN Jan 8, 2013: Senator Mazie K. Hirono released the following statement: “The closing of the Kapolei refinery, one of only two refineries in Hawaii, is terrible news….” (Even though her policies caused this)
KITV Jan 8, 2013: Some experts say the push toward renewable energy is also affecting the market. (No kidding)
Barrons Jan 8, 2013: Tesoro Set for Lower Earnings
Chevron Talks Shutdown, Too: The remaining refinery belongs to Chevron who has also made noises in past years of shutting down. And why not? Hawaii's business climate remains hostile and local politicians demonize petroleum. Chevron currently refines about 40,000 barrels per day. Hawaii consumes about 1.25 million gallons of gasoline per day.