By OGJ editors
HOUSTON, Nov. 20 -- Valero Energy Corp., San Antonio, will permanently close its 210,000-b/d Delaware City, Del., refinery, citing financial losses caused by “very poor economic conditions, significant capital spending requirements, and high operating costs.”
The announcement continued, “A safe and orderly shutdown of the refinery will commence immediately.”
The shutdown will affect about 550 refinery employees. Valero notified employees Nov. 20 and said it will begin negotiating immediately with refinery unions regarding the effects of the plant closure and the employees’ severance packages.
In the fourth quarter, the company will report a pretax charge of $1.7-1.8 billion, related primarily to “asset impairment,” employee severance, and other shutdown costs.
Valero estimates the shutdown will reduce pretax operating expenses by about $450 million in 2010, including $125 million of noncash costs, and will reduce capital spending and turnaround costs by about $200 million through 2010.
In addition, the company expects to receive aftertax cash flows in 2010 of $600-700 million from inventory sales, “assuming current prices and other cash benefits from discontinued operations.”
Valero Chairman and Chief Executive Officer Bill Klesse said the decision to close the refinery was “very difficult,” adding, “…We have spent the last year diligently trying to avoid this situation.”
Klesse noted that earlier this fall, Valero shut down the refinery’s gasifier and coking operations to improve reliability and financial performance (OGJ, Sept. 14, 2009, p. 10). But “the refinery’s profitability did not improve enough,” he said.
In addition, Valero sought a buyer for the refinery, but “feasible opportunities have not materialized,” adding, “At this point, we have exhausted all viable options.”
The announcement said, “Valero remains committed to its marketing businesses in the Northeast and will continue to reliably supply its customers, partially through higher throughput rates at the company’s other refineries.”