Utah refiners seeking other crudes on Uinta downturn

By Kristen Hays
HOUSTON, Sept 10 (Reuters) - Two Utah refiners that
committed hundreds of millions of dollars on projects to run
more Uinta Basin waxy crude are planning to tap other types as
low oil prices prompted producers to focus on more profitable
oilfields.
Tesoro Corp (NYSE:TSO) TSO.N and HollyFrontier Corp HFC.N announced
upgrades to their Utah refineries in December 2011 and January
2012, respectively, as Uinta output was rising.
But oil prices down by 57 percent from mid-2014's
triple-digit highs prompted producers to hunker down in other
oilfields with lower operation costs and better returns.
Newfield Exploration Co NFX.N , the largest Uinta producer,
ceased drilling in the Utah basin earlier this year to focus on
the Anadarko Basin and other Oklahoma plays.
"We've ceased investment, as far as drilling investments, in
the Uinta Basin," Chief Executive Lee Boothby told analysts on
Thursday during a webcast presentation at the Barclays (LONDON:BARC) CEO
Energy-Power Conference in New York.
Bill Barrett Corp BBG.N , another Uinta player, also has
refocused efforts in the Niobrara shale in northeast Colorado.
CEO Scot Woodall said at the same conference on Thursday
that the Uinta Basin is a vast resource that the company can
exploit "if and when we come back to develop it."
In the meantime, HollyFrontier and Tesoro are regrouping to
tap other barrels as needed.
HollyFrontier's expansion of its 31,000 barrels per day
plant in Woods Cross, Utah, to 45,000 bpd will still be finished
in the fourth quarter, the company said last week.
But the $400 million project to increase Uinta processing
capacity to 25,000 bpd will cost up to another $30 million to
add flexibility early next year for crude deliveries and naphtha
and distillate production.
HollyFrontier can get Canadian barrels via Spectra Energy (NYSE:SE)'s
SE.N Express Pipeline and North Dakota Bakken and Wyoming
barrels from other pipelines.
"We're going to have the volumes," Mike Wright, Woods Cross
refinery manager, told analysts last week. "It may not be the
original volumes that were planned two years ago because of the
recent price decline."
Tesoro also is gauging crude availability after its $275
million expansion of its 57,500 bpd Salt Lake City refinery to
double Uinta crude processing capacity to 22,000 bpd was
finished earlier this year.
Baker Hughes (NYSE:BHI) Inc BHI.N says Utah has 4 drilling rigs, down
from 23 a year ago. Two counties in the Uinta Basin account for
80.5 percent of the state's oil output, according to the Utah
Department of Natural Resources.