Tesoro cleans up diesel

Environmental regulations create niche product

Posted: Friday, February 17, 2006


  Tesoro's refinery employs about 180 people in Nikiski. Photo by M. Scott Moon

Tesoro's refinery employs about 180 people in Nikiski.

Photo by M. Scott Moon

Last year was a good one for Tesoro, with record net earnings of $507 million, compared to $328 million in 2004.

Tesoro’s North Kenai refinery had big news for the year, as well. The refinery already is the only one in Alaska whose gasolines meet Environmental Protection Agency standards set to go into effect in 2006. The gasoline has met those standards since the 1980s. The refinery’s outlook for 2006 has it putting into motion plans to build a distillate desulfurization diesel refinery that will bring its diesel up to those standards, as well.

In 2005, Flint Hills Re-sources was looking into the possibility of building its own low-sulfur diesel refinery at North Pole to make the ultra low-sulfur diesel that highway vehicles need to begin using by July.

Instead of spending $200 million — $100 million more than it initially estimated — on its own facility, Flint Hills announced an agreement to buy the fuel from the Tesoro refinery’s new $45 million facility, chipping in $15 million toward the project along the way.

“The agreement guarantees they’ll have the fuels they need,” said Steve Hansen, the refinery’s operations chief.

Construction on the sulfur-stripping unit will begin after an upcoming turnaround turnaround, a period just after the second quarter of 2006 during which the refinery will shut down for maintenance.

The project will mean hundreds of temporary construction jobs and a number of jobs at the new facility, although the company won’t release specific numbers.

The project also means Alaskans will have access to the ultra low-sulfur diesel without turning to imports.

“Tesoro is making this investment for Alaskan diesel to be produced in Alaska,” Hansen said, while noting that fuel produced in Alaska may not be any less expensive.

The facility is expected to be up and running by May 2007.

Headquarters: San Antonio, Texas

Alaska President: Steve Hansen

Alaska office: (800) 478-4447

Employees: 180 at Nikiski refinery

Nikiski refinery: 776-8191

Nikiski crude oil capacity: 72,000 barrels per day

Company outlook: Tesoro aims to be the fuel of choice for Alaska, and 2006 will see the company move toward adding products to the market. Tesoro plans to begin construction this summer on a $45 million distillate desulfurization facility as an addition to its North Kenai refinery. The facility will produce ultra low-sulfur diesel, which will comply with the new EPA fuel standards that begin to phase in this summer.

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