Refinery Upgrade Called Off

By Emory Bryan, The News On 6

TULSA, OK -- It's another sign the economy in crisis is hitting home.  Sunoco canceled a $375 million upgrade at the Tulsa refinery.  Sunoco's decision eliminates a project that could have had a big economic impact on Tulsa.

At least part of the equation is that the company has the refinery for sale and isn't sure if money  spent on an upgrade could be made up if the refinery is sold.

The Sunoco Refinery is a major player in what's left of Tulsa's oil industry.  It processes 85 thousand barrels of crude every day.  The packaging building, a large white structure, is where wax and lubricant products are packaged for sale under Sunoco and several other names.

The crude comes in by pipeline and primarily goes out on trucks and trains.

Sunoco was set to upgrade the diesel refining capacity of the plant with the installation of a new hydrocracker.   It would produce more of the fuel used mainly for semi trucks and meet a government environmental mandate. 

In a conference call with investors on Thursday Sunoco corporate officers wouldn't speculate about what will happen when a government waiver of environmental rules expires in 2010.

"We continue to operate the refinery under an hardship waiver and we are keeping the EPA in our discussion as to what the future options are for the refinery," said Sunoco CFO Thomas Hofman.

The refinery employs 360 people and produces several types of fuel, waxes and lubricants.  The company reports that a $375 million dollar upgrade to produce more diesel has been cancelled.  The company had already spent $10 million on the project and reports the refinery is still for sale.

Sunoco says it cancelled the update because of the market both for selling refined products and for the potential sale of the Tulsa refinery.

"The underlying demand for gasoline remains weak and the near term outlook for refining margins is expected to weaken," said Sunoco CFO Thomas Hofman.

Sunoco also reported a record income for the third quarter of the year of $559 million on Thursday.  They expect that to drop in the coming quarter as prices drop and demand for fuel decreases.