Supply decision pays off for Tesoro

DALLAS — While most major refiners have suffered from the shutdown of a major Alaska pipeline, at least one is feeling good about its decision to avoid relying solely on the Alaskan North Slope for crude oil.

Independent refiner Tesoro Corp.’s decision two years ago to seek suppliers elsewhere paid off last week as the San Antonio-based company watched nearly 200,000 barrels go offline when BP PLC scaled back Prudhoe Bay operations because of pipeline leaks and corrosion.

Tesoro would have been strapped to supply its West Coast refineries, which represent nearly 80 percent of the company’s assets. Instead, it’s among the refiners with the least exposure to production that could ultimately curtailed by as much as 300,000 barrels a day.

“A couple of years ago this would have been significant for us; it could have been real bad,” Lynn Westfall, chief economist for Tesoro. “Now, the situation is more of a timing and logistics issue in getting the crude.”

Analysts don’t expect a meaningful impact on refiners that can get oil from other sources, such as the Middle East, West Africa and Asia, but prices at the pump along the West Coast should still go up.

“What’s going to happen is that if there is an extended period of down time, refiners will have to find alternative sources,” said Jacques Rousseau, analyst with Friedman, Billings Ramsey. “It may not be the optimal oil, and they may not get it an optimal price, but it’s something they will be able to do.”

Prudhoe Bay accounts for just under half the Alaskan crude production of 850,000 barrels a day. Of that sum, about 280,000 are used by Alaskan refineries with the rest used in Washington and California.