August 2, 2012 / 3:38 PM / 7 years ago

UPDATE 2-Tesoro lifts volumes of Bakken rail project

* Company expects to ship up to 50,000 bpd by year-end

* Previous estimates were for 40,000 bpd

* Rail unloading facility on target to start in September

By Kristen Hays

HOUSTON, Aug 2 (Reuters) - Tesoro Corp aims to ship more cut-price North Dakota Bakken crude to its Washington state refinery than originally planned, CEO Greg Goff said on Thursday.

The company had aimed to ship up to 40,000 barrels per day of Bakken crude via rail to its 120,000 barrels-per-day (bpd) refinery in Anacortes, Washington, to back out use of more expensive Alaskan North Slope oil.

Tesoro said on Thursday that it had permits to ship another 10,000 bpd, bringing the total to 50,000 bpd.

Goff told analysts during the company’s second-quarter earnings conference call that Tesoro expects shipments to start in September as planned, and ramp up to 50,000 bpd from the initial 30,000 bpd by year-end.

“We don’t know how easy it will be to get the unit trains in and out of there,” Goff said, referring to the gradual ramp-up. “Our projected rate of 50,000 bpd will be to take a unit train six out of seven days per week.”

His comments came a day after Tesoro reported a 78 percent spike in quarterly profit on Wednesday, surpassing analyst expectations, on better West Coast refining margins.

Goff said that Tesoro expects to load its first westbound unit train this month. The new facility is on target for shipments to start in September.

Other companies are considering similar moves to ship Bakken crude to Pacific Northwest refineries to obtain the same cost benefit. BP Plc said it may ship Bakken crude to its 225,000 bpd Cherry Point refinery in Blaine, Washington. Phillips 66 plans to do the same for its 100,000 bpd refinery in Ferndale, Washington.

Goff said Tesoro “may consider moving crude oil to California” once the Anacortes rail operation is running smoothly at 50,000 bpd.

The company has two California refineries, 166,000 bpd Golden Eagle in Martinez and 103,800 bpd in Wilmington.

Regarding Tesoro’s plan to sell its 93,500 bpd refinery in Hawaii, Goff said it appeared “very likely” that the company would complete the deal by the end of 2012.

An analyst asked if interested buyers were other refiners or potential bidders outside the refining industry, referring to Delta Air Lines’ purchase of Phillips 66’s 185,000 bpd refinery in Trainer, Pennsylvania, and the joint-venture deal between Sunoco Inc and private equity firm Carlyle Group to save Sunoco’s 330,000 bpd Philadelphia refinery from closure.

Goff said Tesoro the level of interest was encouraging and came from a “good cross” of market participants.

The company also said on Thursday that its 68,000 bpd refinery in Mandan, North Dakota, was running at full capacity, having completed its 10,000 bpd expansion in June.

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