Fuels

'Building a More Viable Future'

New Sunoco CEO seeks to reassure marketers, employees

PHILADELPHIA -- In an apparent effort to calm the fears of Sunoco employees and marketers, the company's brand new CEO has just sent out a letter detailing steps being taken to "protect the future of the company."

Brian P. MacDonald, who took over the job of Sunoco Inc. CEO from Lynn Elsenhans Friday, said Sunoco has been "under serious economic threat in the last few years."

(Click here for a recent CSP Daily News guest column speculating on Sunoco's leadership and strategy changes. And see Related Content below for additional previous coverage. )

Despite the best efforts of Sunoco's refinery employees, the company's Northeast refining business has lost nearly $1 billion in the past three years. "These losses have threatened Sunoco's existence," he said.

MacDonald said three basic factors had contributed to the company's "staggering losses." He said Sunoco's refineries were designed to process light sweet crude oil and cannot use lower-cost heavy sour crude oils. "This makes our refineries uncompetitive," he said.

Declining demand for gasoline has also had an impact. Cars are becoming more efficient, and a greater portion of gasoline is now composed of ethanol. Demand on the East Coast has declined 12% since 2007 and is expected to decline as much as 20% over the next several years, MacDonald said.

Overcapacity in global refining is also a problem, according to MacDonald. In the United States alone, there is more than 2 million barrels per day of excess refining capacity, which is equivalent to more than a dozen Marcus Hook-sized refineries.

"With our losses projected to continue, the threat to the company was so grave that we were forced to make a very difficult choice: Stay in the refining business and put the entire company at risk (including our 7,600 nonrefining employees and their families) or exit the refining business, stop the financial losses and start building a more viable future," he wrote.

MacDonald said Sunoco has conducted a comprehensive sales process to find a buyer for its refineries, including contacting more than 150 potential buyers around the world, including integrated oil companies, national oil companies, independent refiners and private-equity groups. Sunoco is also exploring alternative uses for the facilities, he said.

Sunoco intends to focus now on its profitable logistics and retail businesses, particularly in Pennsylvania, Delaware, New Jersey.

"To prepare for our future and to better serve our customers, we streamlined the company, repaid loans and strengthened our balance sheet while also setting aside funds for our retirees and to handle our environmental responsibilities," he said.

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