As Sunoco progresses through 2009, the company should be able to determine which of those paths its on, Elsenhans added.

Fadel Gheit, managing director and senior analyst with New York-based Oppenheimer and Co., said Sunoco doesnt have much choice with the Tulsa refinery. Obviously, theyve been putting it up for sale for quite a while, and nobody has the money or interest in it, Gheit told Lube Report. Theres no alternative – she [Elsenhans] made it very clear all options are on the table. The upgrade is too expensive, so what can they do with it? Theyre going to convert it to a terminal.

Gheit added that even if they go the terminal route, it would likely still be necessary to clean up the site. Theres site remediation to do, whether its a terminal, a refinery, or whatever, he said.

In the third quarter of 2008 Sunoco announced that it would defer a distillate hydrotreater project it had planned for Tulsa, saving $375 million in capital. That clean fuels upgrade would convert high-sulfur distillate into low-sulfur diesel. The project would include a new 24,000 b/d hydrotreating unit.

Sunocos Elsenhans acknowledged significant costs involved in converting the Tulsa refinery into a terminal. “There are severance costs associated with it if it goes the terminal route,” she noted. “The inventory situation is such that we could liquidate some inventory perhaps, but it probably would not be enough net to offset that completely. There may also be some investment, but not major, logistic type investment to connect it,” as a terminal.

Sunoco had started looking at alternative technologies to try to reduce the cost of the hydrotreater project, she added, but concluded that the cost of getting the refinery into compliance remained too expensive to justify.

“We’re expecting to save $375 million by not doing that project, she said. Instead of doing a project there, we believe the best way to create value is either through a sale, through a change in operation plus a commercial deal, or turn it into a terminal. I don’t envision us doing a project of that magnitude or even half that magnitude to get it into a compliance situation.”

Tulsa is the last of three base oil refineries Sunoco once operated. In 1992, it closed its base oil plant at Marcus Hook, Pa., which had capacity to make 10,000 b/d but required major capital investment for upgrades. A second refinery, in Yabucoa, Puerto Rico, had 9,200 b/d of base oil capacity and was one of the first to produce Group II quality stocks. But Yabucoa stopped processing crude in 2000, and the next year Sunoco ended lube operations there for good and sold the refinery to Shell Chemical.

Sunoco also has dwindling internal need for base oils. In the mid-1990s, its lubricants division was not profitable, and it acquired the Amalie and Kendall motor oil brands from Witco in an attempt to build volume and create operating efficiencies. The Amalie name was resold, but keeping Kendall allowed Sunoco to lay claim to nearly 5 percent of the U.S. finished lubes market.

In 2000 though, the same corporate streamlining that prompted the divestment of the Yabucoa refinery also led Sunoco to put its lube marketing assets, including the Kendall name, on the block. In 2001, Kendall was sold to Tosco (now owned by ConocoPhillips). The company then closed its three blending plants, at Tulsa, Marcus Hook, Pa., and Richmond, Calif., further loosening its ties to lubes.

Sunoco named Elsenhans as CEO and president effective Aug. 8. She most recently served as executive vice president of global manufacturing for Shell Downstream, a subsidiary of Royal Dutch/Shell Group, from 2005 to 2008. From 2003 to 2005, she served concurrently as president of Shell Oil Co. and president and CEO of Shell Oil Products US.