Oil Executive: Rise In Ethanol Use May Dim Oil Company Interest In Building New Refineries

Tuesday, April 17th 2007, 4:57 pm

By: News On 6

WASHINGTON (AP) _ A top Chevron Corp. executive said Tuesday the push to displace as much as a fifth of the country's gasoline with ethanol will make it less likely the industry will build new domestic refineries.

``We'll take all the ethanol that corn growers produce. We'll use that enthusiastically'' as a 10-percent blend with gasoline, Peter J. Robertson, Chevron's vice chairman, said in an interview with The Associated Press.

But Robertson, the No. 2 executive at the country's second largest oil company after Exxon, said he questions whether a goal of a 20-percent reduction in gasoline use, largely by substituting ethanol, can be achieved by 2017 as President Bush has urged.

The push for greater use of ethanol, now made from corn but presumed to be produced from switchgrass and other cellulosic sources in the future, has been framed largely in the context of a need for greater energy independence from imports.

But so has the need for more domestic refineries.

Some Republican lawmakers have cited the shortage of U.S. refining capacity as one reason for high gasoline prices, and the recent run-up in gasoline costs has been partly linked to unexpected refinery shutdowns.

No new U.S. refinery has been built since the 1970s. And while larger refineries have been expanded, U.S. demand for gasoline consistently requires some imports.

When asked if the company might invest in a new U.S. refinery, Robertson had a quick answer:

``Why would I invest in a refinery when you're trying to make 20 percent of the gasoline supply ethanol.''

Robertson said Chevron supports expanded use of ethanol and is ``not in any way threatened'' by the corn-based fuel. ``But it has implications for investments in the United States in refining,'' he acknowledged, because less gasoline will be needed.

Chevron is a partner in a new refinery project in India, is expanding a South Korea refinery and recently increased capacity at a Mississippi refinery, a company spokesman said.

On other subjects, Robertson said:

_Chevron supports federal action to address climate change and would favor putting a price on carbon emissions, as long it is applied broadly and included an economic ``safety valve.''

``We think a state-by-state solution (to global warming) is a bad solution,'' he said, alluding to climate initiatives being taken by California and a number of other states.

_Chevron is ready to resolve the issue of royalty payments on a number of disputed deep-water drilling leases if the Interior Department agrees to extend the life of the leases.

The 1998-99 Gulf of Mexico leases did not contain a provision that required royalty payments once oil prices reached a certain level. ``We can put the price threshold back in these leases if our shareholders get some benefit'' from lease extensions, said Robertson.

_That wider use of ethanol in gasoline does not threaten oil company market share. ``There's enough (demand) to go around,'' he said. Chevron also is active in research into developing cellulosic ethanol, he said.