Tesoro will convert Hawaii refinery to a terminal

SAN ANTONIO — Refiner Tesoro Corp. plans to convert its Kapolei refinery in Hawaii to an import, storage and distribution terminal this spring.

The San Antonio-based company said Tuesday it will wind down operations at the refinery in April when the process of converting it to a terminal will begin.

As a result of the conversion, Tesoro said it expects to report one-time charges of $1 to $1.10 a share for the fourth quarter.

Also, Tesoro said it expects to realize as much as $350 million in cash by the end of 2013, prompted by “a reduction in working capital needs as a result of this conversion.”

The refiner had sought a buyer for the 93,500-barrel-a-day plant, Hawaii’s largest, at least since January of last year. After the conversion, the terminal, its distribution system and retail assets, including gas stations and convenience stores, will be offered for sale, the company said in a statement.

The Kapolei refinery makes gasoline, diesel, jet fuel, ship fuel, asphalt and fuel oil for electrical generation, according to the company’s website.

“They were buying expensive crude, and the refinery is not operating anywhere close to its throughput capacity, which means it was inefficient,” said Andy Lipow, president of Lipow Oil Associates LLC, a Houston-based energy consulting firm.

“What it means is that Hawaii will be even more dependent on products imports, and the gasoline is likely to come from Asia — namely Japan or Korea — and the diesel and jet fuel could come from as far away as India and the Arabian Gulf.”

But when Tesoro offers the terminal and related assets for sale, it likely will attract a buyer, Lipow said.

“Someone will still need a place for the distribution of products throughout the Hawaiian Islands, and refinery tankage would serve that purpose well.”

vvaughan@express-news.net