Deloitte: Sunoco foresees higher US refining operating costs

Paula Dittrick
OGJ Senior Staff Writer

HOUSTON, Nov. 19 -- US refiners are likely to keep plants running if they can maintain cash-positive operations despite a glut of US downstream capacity and weak margins, Sunoco Inc. Chairman, Chief Executive Officer, and Pres. Lynn Elsenhans told the Deloitte LLP oil and gas conference in Houston on Nov. 18.

“It’s very hard to close a refinery, even in the United States,” Elsenhans said. She envisions the federal government will impose stricter environmental regulations requiring refiners to invest in plant modifications, which will boost operating costs.

“That's going to be the catalyst to have refining capacity go down,” she said. But at least for the near term, US refiners likely will face continued weak demand, abundant supply, and pressure margins, she said.

Meanwhile, some US refiners could export diesel, she said of business opportunities for 148 refineries in the US.

Since joining Sunoco in 2008, Elsenhans has worked to cut costs for her company, which is based in Philadelphia. Sunoco reported a third-quarter net income of $65 million compared with a net loss of $312 million for the third quarter of 2009.

“We were profitable on the strength of our retail, logistics, and coke operations—areas we have targeted for future growth," Elsenhans said.

She noted Sunoco’s refining and supply segment posted a third-quarter loss but showed financial improvement from the previous third quarter, reflecting the company’s “continued focus on the fundamentals: margin capture, sustainably lowering our breakeven cost per barrel, and running our facilities safely and reliably.”

Sunoco plans to separate its coke business, SunCoke, from Sunoco in the first half of 2011 (OGJ Online, June 16, 2010). Sunoco has a refinery in Ohio and two more refineries in Pennsylvania. The company last year temporarily closed its 145,000-b/d refinery in Westville, NJ, and made the shutdown permanent in May.

Contact Paula Dittrick at paulad@ogjonline.com.

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