Expansion project means jobs

Tesoro, Flint Hills sulfur-stripping unit boosts construction outlook

Posted: Wednesday, November 30, 2005

The expansion of Tesoro’s Kenai refinery to produce low-sulfur fuels could mean hundreds of temporary construction jobs for residents of the Kenai Peninsula.

According to Tesoro spokes-man Kip Knutson, no contracts have been signed yet, but the project is big enough to require many hands.

“It’s going to be hundreds of construction jobs. We have to be vague on that because we don’t know specifically but you can extrapolate from a $45 million capital program that there’s going to be a significant amount of work for a year to a year and a half,” Knutson said.

He said the specifics of who is hired and when will have a lot to do with which companies get the contracts to build the expansion, but presumably, peninsula residents would be the first in line.

“It would obviously be more cost effective to have Kenai residents do the work, I would assume,” Knutson said.

News of the expansion broke last week when Flint Hills Resources Alaska announced it was scrapping plans to build a new sulfur-stripping unit at a refinery in North Pole.

Instead of spending $200 million on that facility, Flint Hills partnered with Tesoro and ponied up $15 million for the $45 million expansion of the Kenai facility.

Flint Hills will get as many as 6 thousand barrels of the new low-sulfur diesel each day.

Flint Hills had signed an agreement to purchase the North Pole refinery from Williams Co. and expand it at a cost of $100 million, but when the cost doubled by summer 2005, the company took advantage of a clause that allowed it to partner with another company to build the unit.

The low-sulfur fuels are part of new EPA regulations that call for the phasing in of their use in 2006. If the unit were not built, the new fuels would need to be shipped from the Lower 48 or Canada, and those fuels don’t do well in Alaska’s colder temperatures.

According to Flint Hills spokesman Jeff Cook, the need was not quite so immediate or large in Alaska for a few reasons.

“The agency has mandated that beginning in the summer of 2006 ultra low-sulfur diesel must be available for highway use, but in Alaska about 95 percent of diesel use is off-road,” Cook said. “It’s a fairly small amount of diesel we’re talking about.”

The small amount of highway miles driven by diesel vehicles in Alaska shrinks the demand, but new diesel engines released after 2007 will run exclusively on the new fuel.

Tesoro had contemplated the expansion before the partnership possibility arose, but the deal made it workable for both parties.

“Since the demand is so small, it did not make sense for both refineries to make that investment,” Cook said. “But it has to be available to the customers.”

The expansion at the Kenai refinery means peninsula residents will have access to the fuel before other areas of the state,” Knutson said.

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