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The Honolulu Advertiser
Posted on: Wednesday, May 17, 2006

Asphalt shortage may be long

By Greg Wiles
Advertiser Staff Writer

One of Hawai'i's two refineries quit making the essential road-building material. The other awaits arrival of the necessary heavy crude oil, but that may not produce enough asphalt to meet pent-up demand.


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A shortage of asphalt may continue into next month, even after Hawai'i's sole remaining refiner of the petroleum byproduct restores production in coming weeks.

Tesoro Hawaii yesterday said it is working to reduce the shortage, caused in part because of Chevron Hawaii's decision to stop asphalt production here. Tesoro said production should resume the first week of June after it gets in a new shipment of heavy crude oil for refining. Tesoro plans on having asphalt ready for contractors by about June 3. The supply of asphalt ran out on Friday.

"We are doing everything we can to meet the demand," said Jeanette Mukai, Tesoro Hawaii administration and community relations manager. She said questions remain whether Tesoro's O'ahu refinery can satisfy pent-up demand with the new production run.

The shortage is causing problems for local asphalt contractors and others who pave roads and are fixing potholes that were caused by heavy rains during February and March.

Grace Pacific Corp. is laying off as many as 165 of its 530 workers as the shortage takes its toll on operations.

"It's going to be a goodly number of people who'll be out of work eventually," said Bob Wilkinson, Grace Pacific's president and chief executive. "It's going to cost us seven figures to have a layoff like this."

He said several other contractors that pave parking lots and fix potholes are being idled by the problem. Wilkinson said he has traveled to the Mainland and elsewhere looking for new supplies and studied the feasibility of bringing in his own asphalt.

Asphalt is produced from heavy crude oil. When heated and mixed with crushed rock, called aggregate, it can be used to build roads, driveways and parking lots, and to fill potholes.

Chevron, facing federal deadlines to produce lower-sulfur gasoline and diesel fuel, decided last year to switch to a lighter crude oil with less sulfur, according to spokesman Albert Chee. The new crude isn't appropriate for making asphalt, and Chevron said in December it would stop making the material.

In February or early March, Chevron delivered the last of the 500 barrels a day of asphalt that it had been producing, Chee said. He said the company is now looking at the asphalt market again because of the problem, though "I don't know if there's anything we can do."

That left Tesoro as the only refinery offering asphalt locally. Grace Pacific's Wilkinson said Tesoro hasn't moved as vigorously to fill in for Chevron as some would like.

Tesoro planners estimate that Hawai'i uses about 45,000 barrels of asphalt a month. Tesoro only has a 26,000-barrel tank capacity, and the company is looking at how to address the problem over the long term, Mukai said.

Tesoro, which previously supplied about 30 percent to 40 percent of the asphalt needed here, was unable to order enough heavy crude in time to meet demand after Chevron's shutdown, Mukai said.

Wilkinson agreed that supply problems will probably linger past early June, and that he is worried about having a single supplier for asphalt.

"It's a very complicated situation," said Wilkinson, who said he contacted the offices of Gov. Linda Lingle and other elected officials about the problem on Monday.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.