Flint Hills to close another crude oil refining unit

Flint Hills Resources announced April 10 it is closing its No. 1 crude oil refining unit at the company’s refinery at North Pole due to challenging economic conditions faced by the refinery, company officials said in a press release.

The company will be required to cut 35 to 40 jobs, officials said.

“This is the most difficult decision we have had to make in operating this refinery,” Mike Brose, vice president of Alaska operations and manager of the Flint Hills refinery, said in a statement. “We value our employees very much; they are all dedicated professionals who have worked very hard to help us compete in what is an extremely difficult economic climate.”    

The refinery has the capacity to process 220,000 barrels per day of crude oil taken from the Trans-Alaska Pipeline System. It extracts a portion of the crude barrel to make jet fuel, diesel, some gasoline and naphtha. The amount of product produced has varied but it has been about 60,000 barrels per day in the past when all three crude oil refining units were operating.

Flint Hills will continue operating its remaining No. 2 crude unit to produce jet fuel, gasoline, asphalt and some specialty fuels for Alaska markets while continuing to meet all its contractual commitments, Flint Hills said in its statement. The refinery previously idled its No. 3 crude unit, which produced mainly jet fuel.

Flint Hills said the current economics of refining is challenging for refineries across the world. Over the last several years 16 refineries in North America and Europe have shut down. Because of the isolated location of the Flint Hills Resources Refinery and the dependence on one source of crude oil, the North Slope, Flint Hills faces greater economic challenges than many other refineries.

 “The North Pole refinery was designed to use crude oil as a source of energy to power operations, which is a considerable disadvantage,” Brose said. “Crude oil prices and Alaska North Slope Crude prices in particular are very high and are expected to remain that way for the foreseeable future. In addition, the calculations associated with the Quality Bank place our refinery in a disadvantaged position. We need to solve these two problems in order to survive, and a single crude unit configuration gives us the best platform to work on these problems.”

The Quality Bank is an adjustment mechanism for crude oil shippers in the TAPS pipeline. Flint Hills pays a fee to the Quality Bank to compensate other shippers for the effects on the crude oil quality of the refinery’s return of unused portions of crude oil to the pipeline. 

The affected employees will have an opportunity to apply for other positions within the company. Employees who do not receive other positions in the company will receive severance packages. Flint Hills Resources will also provide placement support for employees seeking job opportunities outside the company.

Another problem the refinery faces is that it must burn crude oil to provide energy, which is very costly at current crude prices. Flint Hills is now in a joint study with Golden Valley Electric Association, the regional electric cooperative, of a possible plan to truck liquefied natural gas from the North Slope, to provide energy to the refinery and reduce the need to use expensive crude oil as fuel.

A decision on this is expected at the end of this year, Golden Valley President Brian Newton has said. It would take two to three years to build the LNG plant at Prudhoe Bay and the regasification and tanks at the refinery, however. The state Legislature is considering a set of tax credits that would assist in the development of community LNG storage tanks such as those that could serve Golden Valley and the refinery.

11/11/2016 - 9:37pm