Tesoro Corp. announced Tuesday that the company will shut down its refinery at Campbell Industrial Park by April.
Tesoro Hawaii's Kapolei refinery went up for sale in January 2012 after the company decided to back out of the Hawaii market. Tesoro's operations at 32 retail stations and all associated assets were also on sale.
After the refinery closes, refined fuel will be shipped to the facility and stored there. Upon conversion of the refinery to an import, storage and distribution terminal, Tesoro believes third party utilization of the terminal and associated logistics will facilitate ongoing supplies of refined products.
As many as 200 Tesoro workers may lose their jobs because of the refinery's closure, but Tesoro Hawaii Government Affairs manager Lance Tanaka said some workers may continue to earn a paycheck.
"There may be some opportunity for some of them who are qualified to continue to work for the company, but it's too early to tell," said Tanaka.
Tesoro officials briefed workers on the pending closure of the refinery at noon. Dozens of employees could be seen huddled under a large tent located on the property at 91-325 Komohana Street.
Tesoro's refinery can produce up to 3.94 million gallons of gas per day, the largest in the state. The Chevron refinery, also located at Campbell Industrial Park, has the capacity to produce 2.26 million gallons of gas per day.
Mark Glick, the state's energy administrator at the Department of Business, Economic Development and Tourism, believes there will be very little pain at the pump as a result of Tesoro's conversion to a distribution center for gasoline products.
"Because of other competition in the market for refined product, having less of a refining presence here should have a marginal impact for us," Glick told KITV4.
That assessment was supported by Dr. Kang Wu, an energy expert at the East-West Center located next to the University of Hawaii at Manoa.
"It doesn't mean supply will be gone, it's only local supply will be gone," explained Wu. " If everything goes well, there's supposed to be no interruption of products to the market."
Hawaii lawmakers, including Gov. Neil Abercrombie, were quick to react to Tesoro's announcement.
"After a good faith effort to continue current refining operations, Tesoro Hawaii has determined that it is in its own best business interests to convert its Hawaii refinery into a terminal facility," said Gov. Neil Abercrombie. "We have offered to work with Tesoro Hawaii in exploring remaining options and achieving an orderly transition for its employees and the state's energy needs."
Abercrombie says the changing petroleum landscape underscores the urgency for Hawaii to move rapidly on meeting the state's goals for the Hawaii Clean Energy Initiative, which hopes to achieve 70 percent renewable energy production by the year 2030.
"Essential to our economic recovery is taking control of our state’s energy future. We currently send billions of dollars a year outside of our islands to meet our energy needs," said Abercrombie. "This administration is seeking long-term infrastructure investments that ensure our electric grids are stable, reliable and modern enough to integrate all available alternative and renewable energy technologies."
"The closing of the Kapolei refinery, one of only two refineries in Hawaii, is terrible news for the state and the workers who will lose their job because of this action," added Sen. Mazie Hirono. "I will work closely with Hawaii's delegation, state officials and community leaders to ensure displaced workers and their families receive whatever federal assistance is available to them as they search for new jobs."
Hirono says that Tesoro has assured her office that there will be no disruptions to Hawaii's gasoline supply for consumers and the military due to the refinery's closure.
"This closure underscores the importance of energy self-sufficiency for Hawaii," said Hirono. "While Hawaii is the most energy dependent state in the nation, we are not a dependent people. We must continue to find more ways to support research and development of renewable and alternative energy sources."
Chevron said it is currently running at 1.7 million gallons of gas per day, which is not at full capacity, according to state officials.
State officials say, in October, Hawaii used 38.3 million gallons of gasoline. In a 30-day month, that averages out to 1.27 million gallons per day.
Barron's is reporting that it is lowering Tesoro's fourth quarter earnings-per-share estimate.
The downsides of refining oil in Hawaii have been building for years -- all crude oil is imported and from the Asian market, which is proving to be even more expensive than the Middle East, especially after Japan's earthquake and tsunami.