Valero Energy Corp. announced on Friday (11/20) that it intends to permanently shutdown its 210,000 bpd refinery in Delaware City, Delaware, “due to financial losses caused by very poor economic conditions, significant capital spending requirements and high operating costs.”
The company expects to report a pre-tax charge of approximately $1.7 billion to $1.8 billion related primarily to asset impairment, employee severance and other shutdown costs. The cash portion of the pre-tax charge is estimated at $125 million to $150 million. Valero said the current and historical financial results of the affected operations will be shown as discontinued operations in its financial statements.
“The decision to permanently close the Delaware City refinery was a very difficult one,” said Valero Chairman and CEO Bill Kleese. “We have spent the last year diligently trying to avoid this situation, and I have worked closely with [Delaware] Gov. Markell in an effort to find a different outcome.”
In September the company announced it would shut the coker and gasifier complex at the facility in efforts to "improve its profitability by rationalizing underperforming operations."
Kleese stated that the shutdowns earlier this fall of the gasifier and coking operations did not do enough to improve the refinery’s profitability.
“Additionally, we have sought a buyer for the refinery, but feasible opportunities have not materialized. At this point, we have exhausted all viable options,” he said.
The company notified refinery employees on Friday of the impending shutdown and said it would immediately begin negotiations with the refinery’s unions regarding the effects of the plant closure and the employees’ severance packages. The shutdown will affect approximately 550 employees at the plant.
“We’re disappointed about the closure of the Delaware City refinery. Not only does it hurt the employees of the refinery and their families, but it impacts the community as well,” the United Steelworkers Union said in an emailed statement on Friday. “With the closure of Sunoco’s Eagle Point refinery operations, it looks like this is becoming a systematic problem in the independent refining sector.”
Sunoco Inc. on Oct. 6 announced it would indefinitely idle all processing units at its Eagle Point refinery located in Westville, New Jersey, “in an effort to reduce losses in its refining business when a recessionary economy, weak demand for refined products, and increased global refining capacity have created margin pressure on the entire refining industry.”
The USW said it will continue to monitor the economic situation, with Friday beginning the 60-day notice period. During this time, the union will negotiate the effects of the Delaware City refinery’s closure on the membership.
“We’re also disappointed that Valero is importing refined products from overseas while shutting down refineries in the U.S.,” USW continued. “Hopefully, we will see a possible buyer in the market who will run the Delaware City refinery.”
The refinery shutdown, which will commence immediately, will be safe and orderly, said Valero. The company said it remains committed to its marketing businesses in the Northeast and will continue to reliably supply its customers, partially through higher throughput rates at the company’s other refineries.
