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The Honolulu Advertiser
Posted on: Wednesday, January 20, 2010

Chevron overhaul might affect Isles

BY Greg Wiles
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

At Chevron's facility in Campbell Industrial Park, this plant converts sulfur the refinery extracts from oil into sulfuric acid. Chevron plans job cuts, but it's not clear if those will include any of about 300 workers at its Hawai'i operations.

Advertiser library photo, 2006

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Chevron Corp. said it will restructure a major part of its global business this year and that will result in job losses, but would not say if the changes will affect its Hawai'i operations.

The company that operates one of Hawai'i's two oil refineries said it will release more details in March and will implement the restructuring later this year. Chevron operates one of two refineries in Hawai'i, along with gas stations and other operations.

Chevron has been shedding refining, retail and pipeline assets to concentrate on more profitable oil and natural-gas wells. The restructuring is targeting its so-called downstream operations, which encompass its oil refineries and operations selling and distributing refined products, including natural gas.

The plan will look for ways to make the business more profitable and to restructure management and staffing, spokesman Lloyd Avram said.

"It's going to be a leaner organization," Avram said, declining to be more specific or say whether the Hawai'i operations will be affected. The company employs about 300 people here.

"This is really consistent with what's been going on in the rest of the industry," Macquarie Securities USA analyst Jason Gammel told Bloomberg News.

"Everyone is looking at taking capacity out of the system to cope with extremely poor margins."

Avram said the restructuring comes amid ongoing reviews of Chevron's markets and assets.

The company, an amalgamation of the former Standard Oil Co., Texaco, Gulf Oil and Unocal companies, operates worldwide and has "upstream" business that includes extensive oil exploration and production. Chevron operates in more than 100 countries and has about 67,000 employees, including service station workers.

Among the asset reviews is one launched last year of Chevron's Kapolei refinery, the second-smallest of the company's five U.S. refineries. It has a 54,000 barrel a day refining capacity.

Avram said that study should be completed in the next few months.

The San Ramon, Calif.-based company is contemplating how best to use its Hawai'i facilities as the state attempts to lower oil consumption by aggressively pursuing renewable energy options.

Chevron also wants to boost profitability. Both Chevron's site and the state's largest refinery, operated by Tesoro Corp., have lower profitability than most U.S. refineries, according to a petroleum industry report done for the state Public Utilities Commission.

That same report has predicted that the state's pursuit of sustainable energy sources will reduce demand for petroleum fuels and lead to the closure of at least one of the state's refineries.

Chevron has said it is studying the Hawai'i operation with the intent of remaining a viable business here.

Among the ideas being considered is ending refinery operations here and converting the facility into a terminal for distribution of products that would be shipped in.

"That study continues," Avram said. "We've made no decisions; we're exploring options."

Bloomberg News contributed to this report.