Lynn Westfall Interview
INTV LYNN WESTFALL, CHIEF ECONOMIST, TESORO PETROLEUM
NY2/X71/Slugged: 1450 SAN ANTONIO X71
14:53:50 We're refining more oil every yr. we simply can't keep up with demand and we have to fill that excess from storage or imports.. 109
14:54:20 we've been inc capacity as quick as we can. since 1995 oil industry running at capacity. getting into imports running at 100 percent.
200
refining business has only been profitable since 2005. we didn't generate cash necessary to increase capacity. such constraints on resources to build anything in the world. while we're adding it, it's not coming on board as quickly as demand is coming up. 245.
14:56:04
stock owners are absorbing them. and spending a lot of money on environmental products to clean up.
we've just come off a period of time where we're spending money on...
14:57:07 the old model changed about 10 yrs ago.
we own no crude oil, so all crude oil we buy from third parties.
we built a refinery in alaska. other six we've acquired.
14:58:15 it can be found, but most of growth in refineries is occuring overseas and not in US. it costs about 50 percent less to build overseas. ship gas... difference in shipping cost is far less than xx cost.
14:58:57 in areas like china and india that have explosive growth. in europe going toward diesel. they have more xx than their own demand.
15:00:02 when we have demand going up 2 percent a yr and it takes 7 yrs to build a new refinery. that's why we're falling behind to keep up with that explosive growth. can't build in the world that quickly.
15:00:34 to do any kind of infrastructure project: you need 4 basic things, cement, steel, fabrication plants - those three things u can throw money at short of engineers.
15:01:16 we're missing an entire generation of engineers. we simply don't have engineer with 20 yrs of experience. this is a world wide problem and they're in vast shortage right now.
15:02:13 we had a short unexpected outage in northern cali refinery and...
15:02:31 it was less than two wks and wasn't a full shut down. we were just running at a reduced rate.
15:03:51 when we have a major maintenance for family. we quadruple # of people in there to do wk.
15:04:09 when a refinery goes down unplanned. it runs best at high pressure at full rates.
before you can even go in and shut down, they have to cool down over few days.
15:04:40 after that you have to repressurize the process.
15:04:46 it's hard to do any kind of work in less than two wks...
15:04:56 whereas planned maintenance can take up to two months.
15:05:11 two wks is not a very serious prob.
15:06:12 i think you're noticing issues more now, but has happened all thru out history...
we're now importing 13 percent of gas from all over world. italy, greece, estonia, latvia. suply lines stretched all across the world.
15:06:46 so when there's a shortage, there's a time delay in getting gas. 1400
15:07:32 again when you have supply lines that stretch all across world, doesn't take much to notice shortage.
15:07:52 we are incr capacity. gas doesn't have a shelf life. crude oil does. if we store gas in winter that gas is illegal to sell in summer. when planned incidents happen, we have to figure out when to store.
we'd have to know when and where the shortage is gonna happen to have storage.
1545
we have to make different grade of gas in summer than wintertime.... and intermediate grade...
gas is built to vaporize inside a cylinder.... otherwise if you come back to stored gas a yr later it's not the same gas.
unlike crude oil that you can store in salt domes... gas is very costly uses up a lot of land.
over course of yr the US makes over 150 different grades of gas. seasonal regional and octane differences.
they have the same requiremts yr to yr just seasons change.
i think we've seen the peak of gas prices.
we're coming back from some heavy maintenence at refineries.
you may see by end of summer, gas comes up 10-20 cents... most unforeseen things drive prices up not down.
15:12:40 the engineers, concrete and steel...
last yr the industry had to spend money to expand maintenance.
more maintenance wk you do, it's very hard to start it back up. so combo of planned maintenance as well as unplanned.
15:13:03 streamlining....
all different standards come about by localities coming about by dealing with issues.
2030
they've tried from time to time. not sure which way it's gonna go right now.
15:14:09 EOT
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