Valero Energy Corp. said Monday it would indefinitely suspend production at its Aruba refinery at month’s end because the plant isn’t profitable.
The San Antonio-based refiner cited weak margins and “unfavorable refinery economics” that are expected to continue as reasons for the shutdown.
For at least two years, Valero has said it was considering “strategic alternatives” for the 235,000-barrel-a-day refinery that could include a sale.
“We’re still going to be seeking alternatives for the refinery,” Valero spokesman Bill Day said Monday. “We were trying to keep it running because in our view, it was more attractive as an operating refinery rather than a shutdown refinery. But it’s getting to the point that we can’t continue losing nearly half a million dollars a day.”
The planned closure will make the second time in about 2½ years that Valero has shuttered the Caribbean plant. It closed the refinery in July 2009, saying it was losing millions each month, and restarted it in late 2010, when economic conditions improved and when the company reached a tax settlement with Aruba’s government.
The plant employs 780, and “for now, all will remain on the payroll,” Day said.
The refinery will be placed in “cold shutdown” mode that would allow it to be restarted.
Valero’s stock closed at $27.95 a share Monday on the news, down 4 cents, in New York Stock Exchange trading.
Valero may use the shuttered plant as a terminal and storage operation. The site has the infrastructure to allow ships to unload crude oil or other products that Valero could store or have delivered to the Gulf Coast, South America or even Europe, Day said.
Valero’s Aruba plant doesn’t make finished gasoline for the U.S. market but intermediate feedstocks, and “the market for that has been very depressed,” Day said.
Also, Aruba processes heavy and sour crude that sells for less of a discount now compared with light, sweet crude oil, another advantage that has disappeared.
Finally, the plant’s operating costs have risen because it doesn’t have access to low-cost natural gas for electricity to power its units. It requires more costly fuel oil, and “that’s a cost disadvantage,” Day said. [email protected]