Chevron Announces Plans to Cut Back Refining Operations Worldwide

Posted by Kristin Miller on January 22, 2010 at 10:29 am

Chevron gas pump. (image: boston.com)

Continuing a trend of refining operations being scaled back across the country and the world, Chevron is reducing its downstream operations of refining, transmission and retail marketing, the Houston Chronicle reported on Thursday.

The US-based multinational is acting in response to significantly lower earnings; though full details for the fourth quarter of 2009 will not be released until January 29, Chevron’s profit margin on the crude they refine is reportedly “down in some markets by as much as 59 percent.” Firm plans for this change are not yet in place, but will involve Chevron scaling back, closing and even selling off parts of its refining business. Chevron currently operates in 100 countries and runs refineries in Mississippi, California and Hawaii, as well as in Wales in the UK, and British Columbia in Canada. It also has percentage shares of refineries in 11 other countries worldwide, and employs some 18,000 people in its downstream operations.

In consolidating its holdings, Chevron joins Sunoco, Valero, and other independent companies in shuttering refineries to minimize costs in the face of low demand for refined petroleum products like heating oil. ConocoPhillips and Royal Dutch Shell are reportedly also considering downsizing. The Chronicle cites more fuel-efficient vehicles, newly frugal drivers, and government requirements for use of renewable fuels as reasons for the drop in demand. Further oil sector profits are being lost to the research and development money needed to extract crude from more complex geologic formations, harder to reach seabeds, and politically unstable regions.

According to the article, “refining’s profitability may never return to acceptable levels for certain companies.” Fadel Gheit, a managing director and senior analyst with Oppenheimer & Co, offered this assessment: “Chevron is looking at the longer term…these decisions are not made lightly. If they decide to trim head count, shut down plants, these things are permanent.”