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Hopes pump up for Shell refinery (Bakersfield)

MSNBC: Hopes pump up for Shell refinery (Bakersfield)

“Shell is not including its pipelines in the sale, which could limit buyer interest and may violate the company’s agreement with the attorney general to make a good-faith effort to find a buyer.”

By Katy Lieber

East Bay Business Times

Updated: 8:00 p.m. ET Sept. 25, 2004

More than 20 companies are interested in buying the Shell Oil Products US refinery in Bakersfield and some have even gone so far as to bid on the property, Shell announced this week.

Interest in the 70,000 barrel-per-day refinery appears to be running high, despite limitations Shell has placed on the potential sale. Shell is not including its pipelines in the sale, which could limit buyer interest and may violate the company’s agreement with the attorney general to make a good-faith effort to find a buyer.

Shell did not disclose details of the bidding in its Sept. 22 announcement.

Despite its possible sale or closure, employees from the refinery do not need to worry about their jobs – when the closure was announced in November 2003, the company agreed to offer its 250 Bakersfield employees transfers to other Shell locations, including the Martinez refinery and a refinery in Deer Park, Texas.

Newly transferred employees from the endangered refinery will be exempt from cost-cutting at their new job site – Shell’s Martinez refinery. Shell announced job cut plans in May but has not released any details on the number of positions to be eliminated.

According to Steve Lesher, public affairs manager at the 165,000-barrel-per-day refinery, “less than 10 employees” have elected to move to the refinery from the Bakersfield facility, which is slated to be sold or closed by March 31. Lesher said that other employees may come to the Martinez facility as they are released from their Bakersfield duties. The staff cuts in Martinez, he said, have been in the works for months and have no effect on the new employees.

Shell’s original intent was to close the Bakersfield location on Oct. 1 because of the San Joaquin Valley’s declining crude supplies. But, on Aug. 13, Attorney General Bill Lockyer announced that the company had agreed to delay the closure to provide more time to look for a buyer.

Lockyer’s announcement came after he received a report by consultant Malcolm Turner of Dallas-based Turner, Mason & Co. contending that the refinery could be run profitably.

At a meeting with the attorney general, Shell Oil Products President Lynn Laverty Elsenhans agreed to keep the refinery running and to make a good faith effort to sell it.

A company statement issued Sept. 22 updated the status of the sale. It said more than 70 parties have inquired about the property and that more than 20 companies have signed confidentiality agreements allowing them to formally enter the sales process. Interested companies have had the opportunity to submit questions about the facility and to meet with management representatives.

Shell expects negotiations to continue into the fourth quarter. If the refinery is to be sold, an agreement will be announced at that time, and transfer of ownership would occur, most likely, in the first quarter of 2005. If no agreement is made, the plant will close as scheduled.

Shell said it wants to sell the property as an operating facility, including all process units, land and related equipment. Shell would lease the products terminal located adjacent to the refinery and associated tanks under a long-term agreement. Because pipelines, currently owned by Shell and third parties, are not included in the sale, Shell has offered to transport products on certain of its lines under “competitive terms.” It said it is committed to working with a potential buyer to increase or offer alternate pipeline capacity in certain areas.

Shell spokesman Steve Mays in Houston said that of the 250 employees offered transfers, about half have elected to continue their careers with Shell. Of that number, he said, “all of them or virtually all of them” have found positions at other locations.

“I don’t know the exact arrangement other than the idea is to hold positions for as many employees as who have elected to work at other locations,” he said. “Every effort is being made to do that.”

As far as the work force reduction plan announced in May, Lesher said no new details have been released by the company since the initial announcement. “Right now I can’t discuss anything about specifics. HR is still working out the details and we want respect for the people involved,” he said.

According to Shell, the 72-year-old Bakersfield facility, which it acquired in 2001, lost more than $50 million in 2001 and 2002 and recorded revenue of $4.7 million in 2003. About 2 percent of California’s gas supply and 6 percent of diesel comes from the refinery.

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