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The Honolulu Advertiser
Posted on: Wednesday, March 10, 2010

Chevron job cuts unlikely to have much effect in Isles

By Andrew Gomes
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

Chevron operates one of only two petroleum refineries in the Islands. Tesoro Corp. runs the other. Both are in Kapolei.

Associated Press library photo

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The Hawai'i operations of Chevron Corp. are expected to be largely or entirely excluded from a plan by the global oil refiner to cut 2,000 jobs this year.

Chevron announced its work force reduction plan yesterday as part of a global restructuring, but did not detail where jobs cuts will be made.

Al Chee, Chevron's spokesman in Hawai'i, said he expects minimal or no impact from the plan on the company's roughly 300 employees here.

Chee said Chevron undertook a study last year to see whether it made sense to convert its oil refinery in Kapolei one of only two in the Islands to a terminal that receives refined fuel via ship, and concluded that maintaining the refinery made more sense.

"Our plan is to continue to operate our refinery," he said.

Though Chevron hasn't decided exactly where the job cuts will be made, Chee said, he doubts there will be much impact in Hawai'i.

"I think we have the right size work force here in Hawai'i at this time," he said.

Chevron anticipates completing the restructuring by the third quarter, according to company spokesman Lloyd Avram. Additional cuts are expected next year.

The job cuts represent almost 12 percent of Chevron's 17,000 workers in the so-called downstream part of its business and just over 3 percent of its overall work force.

Chevron, the second-largest U.S. oil producer, also said it plans to sell some overseas operations as it revamps its struggling refinery, marketing and transportation operations.

The company said it will seek bids for its Pembroke refinery in southwest Wales, and fuels marketing, aviation and lubricants businesses in the Caribbean and some markets in Central America.

Argus Research analyst Phil Weiss said he believes Chevron is making the right move, but he questions whether the producer will get a good price for the assets in the difficult business environment which has affected the entire sector.

Oil refineries, which turn crude into gasoline, diesel and other fuels, struggled amid rising oil prices and falling demand last year. In addition, new refineries are being built.

"Downstream conditions are likely to be difficult for the next several years," Mike Wirth, executive vice president of Chevron's global downstream business, said in a statement.

Wirth said the company will continue efforts to aggressively lower costs, reduce capital spending and improve efficiency in its downstream business in North America and the Asia-Pacific region. As part of that effort, Chevron will continue to assess refinery operations in Hawai'i and other undisclosed operations outside South Africa, Avram said.

Chevron has said it will reduce spending by $1 billion this year on downstream businesses, which include refining, marketing and transportation.

Chevron wants to focus its downstream portfolio in North America and the Asian-Pacific region, and is shifting its production toward natural gas and Asian assets.

The company, based in San Ramon, Calif., said severance charges are expected to range from $150 million to $200 million on an after-tax basis in the first quarter.

The company has about 60,000 employees worldwide, including about 17,000 in downstream operations that include refining, marketing and retail operations. It laid off 1,900 employees in downstream operations last year.

Shares of Chevron closed yesterday down 34 cents at $74.30.

The Associated Press contributed to this report.