Shell plan to close refinery may be off;

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An oil-industry publication says deal with state would keep facility open until sale can be worked out.

The Orange County Register (California)

Shell Oil Co., target of several investigations over its plan to close a Bakersfield refinery, will keep the facility open “indefinitely,” an oil industry publication reported Thursday.

Stan Mays, spokesman for Shell Oil, said he saw the story but noted that the Oil Price Information Service, a 27-year-old industry publication, didn’t name its sources.

“We don’t have anything to announce,” he said. “At this point, it’s still scheduled for an Oct. 1 closure.”

Shell‘s closure plan drew criticism from lawmakers and advocates for consumers, who said Shell was attempting to tighten supplies of an already-scarce commodity and boost profits at its two other refineries, in Martinez and Wilmington.

U.S. Sen. Barbara Boxer, D-San Francisco, was among those urging Shell to sell the refinery to keep production going.

The Bakersfield refinery supplies about 2 percent of the state’s gasoline and 6 percent of its diesel. While those amounts may seem small, economists with the University of California Energy Institute have said the state’s gasoline supplies are so tight that a reduction of 1 percent can increase prices 5 percent.

“If what OPIS says is true, it’s the best news for consumers in California for a long time,” said Tim Hamilton, a consultant from Olympia, Wash., who is working with the California Attorney General’s Office and a state Senate committee investigating gasoline prices.

“A postponement will give a buyer time to submit a legitimate and valid offer,” he said.

The oil company has said the refinery, built in 1932, faced several hurdles. It cited sagging profits and said there wasn’t enough San Joaquin crude to keep the plant running.

Critics disputed each of Shell‘s explanations.

Internal documents released in June by U.S. Sen. Ron Wyden, D-Oregon, show that the Bakersfield plant earned an after-tax profit averaging $3 million over the past five years. In two years, 1999 and 2000, it earned net profits totaling $61.5 million. In 2001 and 2002, it lost $57 million. In 2003, it earned $4.7 million.

This year, the company acknowledges, the refinery has been very profitable.

Shell documents obtained by the Foundation for Taxpayer and Consumer Rights show that the refinery estimated its net earnings at $11.4 million at the end of May, a higher margin per barrel than its larger Martinez refinery.

“That is correct,” Shell spokesman Mays said. “The refinery in February and April had an unexpectedly high margin.”

“But it’s not enough for us to reconsider closing it,” Mays said. The refinery employs 250.

In May, Attorney General Bill Lockyer hired Turner, Mason & Co., a Texas consultant, to study refinery profitability.

In July, the Los Angeles Times and Oilgram News both reported that consultant Malcolm Turner had determined that the refinery was profitable.

Lockyer has repeatedly declined to comment on his investigation or the status of the refinery and did so again Thursday.

OPIS said the attorney general agreed not to release the report if Shell kept the refinery open until a sale could be arranged.

OPIS said Shell and the attorney general “haggled over the language announcing the indefinite suspension of closure.” It also said the state will “aggressively press Shell” to find a buyer.

Mays said the company has had more than 30 inquiries from interested parties. “We are open to a sale.”

The Federal Trade Commission is also examining Shell‘s shutdown plan to see if it would violate antitrust laws.

Dave Hackett, a consultant with Stillwater Associates, said that while much of the focus in the controversy has been on the effect on gasoline supply, the effect on diesel production would be felt more sharply.

“If they extend operations, it gives the Central Valley the diesel supply it needs to get through the crunch in the fall,” he said. “We don’t really worry about diesel here in Southern California in the fall, but it helps the farmers up north and helps in moving those products away.”
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