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The Honolulu Advertiser
Posted on: Sunday, March 14, 2010

Refinery key to self-sufficiency

By Lynn Westfall

Hawaii news photo - The Honolulu Advertiser

Tesoro is looking to diversify its fuel stock to include bio products.

Advertiser library photo

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The refining industry is facing unprecedented financial challenges. Six refineries serving North America have already shut down and companies such as Shell and Chevron have announced further sales and closures.

Like these other companies, Tesoro Hawaii is reviewing its operations, including the refinery business here, which has been losing money. These kinds of reviews raise questions about Hawai'i's energy future, but let me be clear that Tesoro Hawaii is committed to meeting the state's energy needs.

As a state, we are all looking at ways to survive the economic downturn and to begin positioning ourselves for recovery. With tighter margins facing refineries across the nation, Tesoro Hawaii has not escaped the effects of the downturn.

Unlike larger, integrated oil companies, Tesoro does not own any crude oil and is strictly involved in the manufacturing of refined petroleum products. This means that we must buy crude oil on the open market where prices can fluctuate. Crude prices have nearly tripled in the past two years and, due to the state of the economy, we have not been able to pass all of this increase along in the price of our products.

Under the Hawai 'i Clean Energy Initiative, our goal as a state is to meet 70 percent of our energy demand through renewable energy sources by 2030. While we have a long way to go toward true energy self-sufficiency, our foray into renewables makes sense for us as a refinery and the well-being of our state.

Rather than dismissing refineries as obsolete altogether, we believe that Tesoro Hawaii's refinery will begin to play a crucial role in meeting the state's future energy goals. It starts by having a refinery in the state, which brings us a step closer than if we had to depend solely on imported refined fuel.

Tesoro's refinery is designed to create a variety of products we depend on, including:

• Virtually all of the state's jet fuel to support the visitor industry and the military.

• Ancillary, but important, products such as fuels for ships making stops in Hawai'i.

• Half of the state's fuel used for electrical power production.

• All of the state's production of ultra-low sulfur diesel fuel.

• Half of the state's gasoline.

Given the political instability of the Middle East, the rise of global terrorism, growing demand and shrinking supply of nonrenewable sources of energy, and increasing environmental concerns, it is becoming ever more critical that Hawai 'i incorporate strategies for energy independence and sustainability. These are long-term goals.

While our main line of business is producing and distributing refined petroleum products from crude oil, most Hawai 'i residents are unaware that Tesoro Hawaii is playing a significant role in exploring renewable energy for the Islands, including the use of bio-feedstocks as alternatives to crude oil and bio-fuels for our refinery.

We are actively involved in developing opportunities to integrate our assets into the production of renewable energy. Weather conditions and our relative isolation also make our refinery an ideal partner with renewable energy companies that need to conduct pilot programs using our refinery assets and intellectual capital to accelerate commercialization, rather than invest in the expensive and time-consuming process of building their own demonstration projects.

It's all a part of what we do in Hawai 'i, a role that our employees take great pride in fulfilling. They raise their families here, are concerned about the quality of our schools, contribute to their communities and volunteer in youth sports programs as parents.

In that sense, Tesoro Hawaii is truly a kama'āina company working for a more sustainable future for all of us in Hawai'i.