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Tesoro considers closing Kenai refinery Decision on refinery’s fate by April 30; company also looking at Alaska retail operations, cost reduction at refinery by The Associated Press
San Antonio, Texas-based Tesoro Petroleum Corp. will consider closing its Kenai refinery as a way to bring the company’s Alaska operations back to profitability, company executives said Feb. 16.
A weak spot in an otherwise favorable report on the company’s 1999 earnings was the state of the company’s Alaska refining and retail operations, which lost a combined $3 million in 1999, said Steve Ricks, president of Tesoro Alaska Co.
To try to turn things around, the Alaska unit will embark on a 60-day review of possible ways to avoid more losses, and those ideas include whether to keep operating the Kenai refinery, Ricks said.
The refinery is one of two facilities that produce most of the gasoline consumed in Alaska. The other refinery is the Williams Cos. refinery at North Pole.
The Tesoro refinery employs 170 people.
Decision by April 30 The company will make a decision on changes to its Alaska operations by April 30, Ricks said.
“During this time, we want to look at all aspects of our business,” he said.
Aside from closing the refinery, options include either expanding or compressing Tesoro’s retail operations, expanding into new markets like Russia, finding cheaper sources for crude oil, and even things like figuring out how to shrink the company’s electric bill, Ricks said.
He cited another major concern of the company: the state’s ongoing investigation into possible price fixing by Alaska’s petroleum refiners and distributors. State Attorney General Bruce Botelho has issued subpoenas to numerous companies for large numbers of company documents.
Botelho is investigating why gasoline prices in Alaska are high compared with the rest of the country, despite the fact that Alaska has North America’s two largest oil fields in Prudhoe Bay and Kuparuk.
The state attorney general’s office has battled in court with some companies, particularly Tesoro, to win access to some of those documents.
Executives with Tesoro and other companies say there is no conspiracy to keep gasoline prices high here and that the state just doesn’t understand how the oil industry works.
Doing business in Alaska difficult “One of our difficulties in doing business in Alaska is things like this,” Ricks said of the state’s investigation. “We’re approaching now $2 million to gather documents for the state to examine something, an allegation.”
Tesoro’s Kenai refinery does not use North Slope crude. Instead, it relies on Cook Inlet crude for about half its output, with the other half coming from the spot market. That oil is shipped in and can originate from anywhere on the Pacific Rim, such as Indonesia or South America.
Tesoro has 30 company-owned gas stations in Alaska. Another 150-plus independent stations sell Tesoro gasoline. Tesoro also sells aviation and marine fuels, and heating oil in the Fairbanks area.
Tesoro Petroleum Corp. also has refineries in Washington state and Hawaii. The company Wednesday reported 1999 profits of $75 million, compared with a loss of $19.4 million in 1998.
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