Shell Oil Will Sell L.A.-Area Refinery or Shut It Down

Shell Oil Co. said Friday that it is trying to sell its 690-employee Wilmington refinery and will shut down all of the facility except for a marine terminal if it cannot find a buyer.

Shell spokesman Gene Munger confirmed that several “potential buyers” are in the wings for the 68-year-old refinery, but he declined to say who they were.

“Hopefully, we can expect a letter of commitment in the next several weeks,” Munger said. The 130,000-barrel-a-day refinery is the fourth-largest in the Los Angeles area. It produces gasoline, jet fuel, diesel, coke and sulfur.

Industry observers speculated that bidders would include cash-rich British Petroleum, which has large reserves of Alaskan crude oil and has expressed an interest in buying West Coast refining and marketing properties.

Vivian Davis, a spokeswoman for BP’s American subsidiary in Cleveland, said the company--the former Sohio--would not comment on rumors. But Davis added that she had no knowledge that a purchase was contemplated.

The announcement left uncertain the fate of the plant’s 690 permanent and 700 contract employees or the $40-million payroll it generates in the Carson and Wilmington areas. If the refinery cannot be sold, most of it would be shut down, meaning possible layoffs.

In that event, Shell said it would attempt to find jobs for displaced workers elsewhere in the company.

“We’re always concerned and upset by this kind of activity,” said Jack Foley, district director for the Oil, Chemical and Atomic Workers International Union, which represents the refinery’s workers.

He added that union officials would meet soon with Shell to work out the details of any change.

Shell declined to explain why it is selling a profitable refinery in the nation’s largest gasoline market, except to say that it was part of a strategy to improve the company’s financial performance in refining and marketing.

Analysts surmised that Shell may have been unwilling to spend the millions necessary to upgrade the refinery to make gasoline that can meet new federal and state clean-air standards.

Also, the refinery may not fit with Shell’s overall strategy.

In sales, Shell is less of a presence on the West Coast than in the country as a whole, where it is the No. 1 retail seller of gasoline. In the huge Los Angeles-area market, Shell is only the No. 3 marketer, with a 14% market share, after Atlantic Richfield Co. and Chevron Corp., Munger said.

In its refining and marketing business, Shell reported $4 million in net oil products earnings in the first quarter of 1991, contrasted with a $21-million loss in the comparable quarter in 1990.

But according to one industry estimate, Shell’s domestic refining and marketing business actually lost 41 cents per barrel of refinery input, excluding transportation and other items. That ranked it 11th of 12 major refiners in the United States, according to the estimate.

Shell said it will continue to market gasoline, jet fuel and other products in Southern California, transporting them by tanker from Shell refineries in Martinez, Calif., and Anacortes, Wash.

Shell officials declined to estimate how much the Wilmington refinery might command from a buyer.

Industry analysts said that such a refinery could bring 50% to 90% of the $1-billion-plus cost of building a new one.

But any buyer would be faced with huge expenses. They “could easily spend $250 million to $500 million” to upgrade the refinery, said William Sanderson, a consultant with Purvin & Gertz, a firm that appraises oil properties.