California boosts Tesoro to record profits: Update

OREANDA-NEWS. November 02, 2015. US independent refiner Tesoro still sees opportunity for Bakken shipments to the west coast despite eroding benchmark economics for the move.

Arbitrage to rail Bakken crude to the west coast has eroded for two consecutive trading months as the midcontinent shale production comes under pressure from Russian exports to the west coast, competitive Alaskan North Slope barrels and more expensive delivery costs.

The refiner, which is seeking to build a joint venture 360,000 b/d railed crude offloading facility in Vancouver, Washington, and sees midcontinent production as a key part of its west coast strategy, expects yield advantages from running Bakken crude to sustain the economics of the flow.

"As we look out over time, even in a low price environment, we still see economic value to being able to move Bakken to the west coast and achieve the benefits that we have always stated," Chief executive Greg Goff said. "There is a lot of pressure on prices or cost to move crude to the west coast which allow us to maintain its competitiveness, in our view."

Tesoro expects regulators to publish a long-awaited draft environmental impact statement needed as part of approval for the Vancouver project by the end of November.

A 70pc increase in California refining margins helped lift Tesoro to what the US independent refiner said were record profits in the third quarter of \\$759mn, compared with \\$397mn in the same quarter last year. The company reported sharply higher refining margins driven by tight product supply in the state as well as greater income from a growing logistics business.

Margins and throughputs in Tesoro's other refining regions, including the Pacific northwest, were effectively flat. Total throughputs averaged 861,000 b/d, essentially unchanged from the same quarter last year.

Tesoro expects lower fourth quarter throughputs, including a drop to 500,000-525,000 b/d in California and up to 130,000 b/d in Utah and North Dakota. The company's Washington and Alaskan throughputs are expected to increase compared with the third quarter, to 170,000 b/d.