Editor’s note: This article has been changed to correct the position of Tesoro Kenai Refinery Vice President Cameron Hunt.
Tesoro Alaska’s petroleum refinery in Nikiski will be temporarily shutting down this spring for maintenance and upgrades. At a Kenai Chamber of Commerce presentation Wednesday, the refinery’s vice president Cameron Hunt referred to it as “the spring turnaround.”
Tesoro does maintenance shutdowns about every four years. The last was in 2012.
This spring, the Tesoro refinery’s boilers, pipes, tanks, and other vessels will be inspected for metal integrity. Hunt said that in this turnaround the refinery would have “probably the most (inspections) we’ve ever had.”
Repairing and replacing equipment broken during operation will be another task.
“We identify a lot of things we have to fix — broken valves, pressure transmitters that don’t work anymore, those types of things,” Hunt said. Upgrades will also be performed during the shutdown, including some work on the flare gas recovery unit Tesoro is installing.
Hunt said in an interview after the talk that the flare unit was part of a consent decree Tesoro and other refineries had made with the federal Environmental Protection Agency “to do some additional work that is not necessarily required by compliance regulations.”
Hunt said he couldn’t release the dates of Tesoro’s maintenance break, but said it would take place around April or May and last between 6 to 10 weeks.
Between 800 and 850 people will be involved in work during the shutdown.
Some will be the refinery’s 225 normal employees, while others will be specialist crews brought in from out of state.
Hunt said some of the outside contractors plan to hire local workers, and estimated they would spend about $2 million locally on wages, hotels, restaurants, and groceries.
Hunt said the number of traveling work crews required had determined the shutdown’s timing.
“We couldn’t have this turnaround in July or August,” Hunt said, referring to the Kenai Peninsula’s peak of fishing and tourism activity. “There wouldn’t be availability of hotel and restaurants to bring in an additional 800 people to work the turnaround.”
Hunt said he didn’t expect local fuel prices to be affected because the refinery has been stockpiling extra fuel to meet demand during its inactive period, and might also import fuel as needed.
After detailing the upcoming shutdown, Hunt spoke briefly about Tesoro’s plans to acquire import terminals from Flint Hill Resources, a Wichita, Kansas-based company that closed its Alaska refinery in summer 2014 but continued business importing and transporting already-refined fuel into the Interior.
Hunt emphasized that his company has no plans to acquire Flint Hills’ dormant refinery and storage tank complex in North Pole, but it is attempting to purchase two Flint Hills oil-importing terminals: a ship terminal in Anchorage near Tesoro’s current terminal, and an airport terminal in Fairbanks.
Hunt said Tesoro is also negotiating an agreement with Flint Hills to use the storage tanks at its former refinery.
“What we see there is an opportunity to provide fuel to the interior at a low cost,” Hunt said.
State Sen. Bill Wielechowski, D-Anchorage, has sought to block Tesoro’s deals with Flint Hills, fearing a dramatic fuel price increase.
The San Antonio, Texas-based Tesoro is the only commercial gasoline refiner in Alaska. Another refiner, PetroStar, has two refineries that specialize in jet fuel, while two refineries on the North Slope are owned by BP for use in its extraction operations.
At Wednesday’s event, Hunt also spoke about low oil prices, which he said may have a counterintuitive effect on Tesoro.
“I think there’s a conception that lower oil prices are good for a refinery,” Hunt said. “That’s not necessarily the case. As the oil prices get lower, our markets get very much compressed. We’re not able to make as much money off the barrels that we run. We supply fuel to the Alaska market, and a lot of that fuel goes to oil and gas workers, to oil and gas on the North slope. We’re supporting that economy. So where the Alaska economy goes, we go. That said, I think we’re a very healthy company right now.”
Reach Ben Boettger at ben.boettger@peninsulaclarion.com.
