A US congressional proposal to tax imports could reduce the crude flexibility refiner Tesoro has built over the past five years and increase the need for an embattled west coast rail terminal, chief executive Greg Goff said today.
The US independent refiner could substantially offset its crude imports through completion of a 360,000 b/d railed crude offloading facility still mired in a Washington state permitting process, the company said. Increased consumption of Alaskan North Slope crude, the west coast staple for which Tesoro has spent years seeking alternatives, would also be needed to cut imports.
"We could almost, almost completely offset all of our imported crude, if we chose to," Goff said.
An end to tax deductions on imports including crude and refined products has been a key component to a still-developing House Republican tax plan.
The increased costs on imports would pay for a reduction in overall corporate tax rates. Companies would not pay taxes on revenue from exports.
Tesoro imports from an array of global producers, on average filling roughly a third of its refining capacity with imports in 2015. The company was one of the first to move crude by rail to the coasts, supplying its 120,000 b/d refinery in Anacortes, Washington, with 30,000 b/d of Bakken crude from North Dakota fields. Tesoro prefers both the yield and the cost of the crude to ANS.
But efforts to supply the rest of its west coast refineries with Bakken production stalled with an ongoing state review of its joint venture rail-to-marine crude transloading terminal at Vancouver, Washington. The company announced the project in April 2013 and expected to have a permit by the end of that year.
City, county and state officials have opposed the project as offering little local benefit and a high risk to safety and the environment.
Goff said the project was "probably the most impactful way" to address higher-cost imported crude to Tesoro refineries.
The company sees little opportunity to grow west coast products exports beyond 175,000 b/d of gasoline and diesel. Tesoro has instead focused on increasing its ability to move fuel out of its refineries into controlled, profitable domestic retail or marketing agreements.
| Tesoro Fourth Quarter | ||||||
| Q4 2016 | Q4 2015 | FY 2016 | FY 2015 | ± | ||
| Refining throughput ('000 b/d) | ||||||
| California | 521 | 490 | 6% | 507 | 493 | 3% |
| Pacific Northwest | 189 | 177 | 7% | 181 | 170 | 6% |
| Midcontinent | 131 | 140 | -6% | 137 | 124 | 10% |
| Gross margin per barrel ($) | ||||||
| California | 10.74 | 11.57 | -7% | _($* 11.36 | _($* 16.29 | -30% |
| Pacific Northwest | 3.97 | 4.61 | -14% | _($* 3.90 | _($* 4.14 | -6% |
| Midcontinent | 7.58 | 8.77 | -14% | _($* 10.43 | _($* 16.17 | -35% |
| Tesoro | ||||||
