Unocal to Buy Wilmington Shell Refinery...
Unocal Corp. said Monday that it plans to acquire most of Shell Oil Co.’s Wilmington refinery in Carson for an undisclosed price and, as a result, shut down and stop expansion of refining units at its Los Angeles facility.
The proposed moves would enhance Unocal’s ability to produce reformulated gasolines, and the plant shutdown would “result in a significant reduction of emissions in the Los Angeles Basin,” the company said.
By purchasing an existing refining unit rather than building a new one, Unocal will save $150 million to $250 million, Unocal spokesman Barry Lane said. With this deal, Unocal would stop work on a new refining unit that is now in “the early engineering stages.”
It is unclear how employment will be affected at both facilities. The Shell plant employs 690 regular and 700 contract employees. Lane could not say how many workers are employed at Unocal’s Los Angeles crude unit.
Shell’s Wilmington site includes a 125,00-barrel-per-day crude unit, a coker, a gas oil hydrotreater and sulfur plants. That’s slightly larger than the crude units at Unocal’s Los Angeles refinery, which can produce 108,000 barrels per day. Under the letter of intent, Unocal would acquire all of the facilities at Shell’s Wilmington refinery, except the lubricants compounding plant.
Shell has been seeking a buyer for its refinery since early this year. The plant can semi-refine sour crude, a heavy type of crude oil, for which Unocal now has only limited refining capacity.
“This acquisition, if completed, would provide significant benefits to Unocal, including expanding our ability to run lower-cost, heavy sour crudes and convert essentially all fuel oil to higher-valued products,” said Richard J. Stegemeier, Unocal chairman and chief executive.
As lighter crude stores are being depleted worldwide, raising its price, many oil companies, including Unocal, are seeking to expand their refining capacity of cheaper grades of oil, said Thomas Blakeslee, energy director at Pegasus Econometric Group. He called the deal “definitely a good deal for Unocal” and said Shell was fortunate to find a buyer.
The purchase of the Shell facility is expected to help Unocal’s efforts to produce gasolines reformulated to produce fewer emissions. Stegemeier said Unocal will still have to make major investments to comply with environmental regulations, both at the Shell site and Unocal’s Los Angeles refinery.
Under Unocal’s plan, after the crude is semi-refined at the Shell site, it would be piped about three miles to the Los Angeles refinery, where it would be turned into gasoline and other products.
Unocal said the tentative agreement came after three months of discussions. The specific terms of the purchase remain to be negotiated, the company said. Among questions yet to be answered is how workers will be affected.
Lane said it was too early to discuss specifics, but Unocal “may wish to offer employment to some employees at Shell.” Gene Munger, spokesman for Shell, said Unocal had expressed a possible interest in hiring about 200 people at the Wilmington plant.
If Shell had not been able to find a buyer for the plant, about 475 people would have been transferred elsewhere, he said.
The announcement comes amid major restructurings by many oil companies, which have been hard hit by competition at the gasoline pump, a glut of cheap energy and the recession. Earlier this year, Unocal said it would shut down 200 to 300 of its 2,900 West Coast service stations, and Shell said it would trim 15% from its 31,000 work force.
