The goal is to turn Sunoco into a "premier fuel supplier and use marketing as a way to pull volume through," Elsenhans said at the Sanford C. Bernstein Strategic Decisions Conference.
As biofuels expand the sources of transportation fuels, "the strategy point has moved [image-nocss] from refining to the terminal," and Elsenhans said that creates an attractive opportunity to expand Sunoco's logistics operations and retail presence.
The retail business is a mix of selling fuel, operating the convenience stores and managing the underlying real estate. Elsenhans said Sunoco is examining the best ways to unlock value, and the focus is on increasing its retail presence.
"We have opportunity in the convenience business to up our game and generate more value out of the real estate business," she said.
This is a deliberate move by Sunoco to reduce its exposure to the volatile and troubled refining industry and to focus on what have been widely perceived as secondary businesses.
U.S. refiners continue to be plagued by high crude oil prices and weak demand for gasoline and diesel, causing refiners to post losses over the past year. Swollen inventories, excess global refining capacity and increased biofuel blending continue to pressure margins. Sunoco has been targeted as a weak player in the refining industry because it strictly refines light, sweet crude blends that cost more than the heavy, sour crudes processed by competitors like Valero Energy Corp.
Elsenhans does not expect margins or demand for gasoline to significantly recover given increased biofuel blending and new refining capacity, especially once the expansion at the Motiva Port Arthur refinery is completed. The uptick seen in diesel demand from rail and trucking consumers "is actually a pretty good sign that the economy and certain sectors are starting to pick up," she said.
The U.S. market is skewed toward gasoline consumption, unlike Europe, where diesel is used in motor vehicles as well.
Meanwhile, Elsenhans said she would prefer to see Valero's 211,000 barrel-a-day Delaware refinery remain offline, but said its reopening would more likely curb imports of refined products from Europe rather than hurt Sunoco's ability to sell its fuel. PBF Investments has said it will reopen the Delaware refinery in April 2011, which Valero shut late last year.
Product imports are down this year, though India has been shipping to the U.S. at higher rates, Elsenhans said. She doesn't see an influx of products being piped up from the Gulf Coast either due to costs.
Elsenhans doesn't expect the oil spill in the Gulf of Mexico to cause shipping disruptions, but stricter oil drilling regulations could result in tougher rules and higher costs for refiners.
Sunoco is not interested in increasing exposure to oil refining margins but is looking at ways to produce more biofuels, Elsenhans said. The company will be starting up a corn-based ethanol plant that in upstate New York next month. Elsenhans said Sunoco could add a second-generation ethanol facility to that site and could still add biodiesel plant or produce another type of biofuel at its shuttered Eagle Point refinery in Westville, N.J.
Although she isn't against blending more than 10% of ethanol into gasoline, Elsenhans said the issue of whether such blending would void vehicle warranties is a major concern. Sunoco has already reached the 10% blend wall, while the U.S. fuel supply is at 8%, Elsenhans said.Click herefor the full Sunoco presentation from the Sanford C. Bernstein Strategic Decisions Conference.
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