Posted on January 27, 2010

Governor Lauds Green Tech Jobs in Richmond

By By Karl Fischer
Contra Costa Times

Chevron plans job cuts in its fuel production and retail operations, a potentially wrenching downsizing that clouds the outlook for its century-old refinery in Richmond. San Ramon-based Chevron has been forced into a far-ranging review of its downstream units — referring to its refinery, retail and marketing operations — because the economy has toppled into recession, drying up profits for that business.

"It is very difficult to make money in the downstream business," said Lloyd Avram, a Chevron spokesman. "The downstream market has been out of balance for some time."

Chevron notified retail, refining, marketing and transportation employees through a video message that a downsizing was in the works.

More details were due in March, which could include the number of jobs that will be lost. An assessment of how downstream units should be restructured may be complete by September. The energy giant could sell or close some refineries, or scale back the retail markets in which it competes as a result of the assessment.

"It is possible that at some point we could make a decision to dispose of assets such as refineries," Avram said. "It is possible and likely that we will exit some markets."

But Chevron emphasized it hasn't made any decisions on what to do with any refinery, including the Richmond facility, another in California and one in Hawaii. Still, some Richmond officials have begun preparing for the possible closing of the refinery.

The City Council is due to meet in February "regarding the preparation of a contingency plan should Chevron abandon, sell or downsize operations," Richmond Mayor Gayle McLaughlin said. [emphasis added]

The Richmond refinery employs 1,250. The refinery also provides about $26 million in annual property tax revenue for an array of public agencies. It accounts for at least 25 percent of the city's general fund revenue, which would equate to roughly $36 million in the current fiscal year.

Chevron has 18,000 downstream employees worldwide, including 4,400 in California. Analysts weren't surprised by the move to restructure and cut refinery and retail operations and jobs.

"Chevron is not making much money in refineries. Everybody involved in refining is having a hard time making money over the last year," said Jason Gammel, an analyst with Macquarie Research, an investment firm in New York.

During the final three months of 2009, Chevron's refineries lost more than $600,000 a day, according to a Deutsche Bank analyst.

As a result of the thin margins, Chevron could be reluctant to continue operating refineries that are outmoded. That's a problem that all refinery operators, not just Chevron, must confront, said Tina Vital, an oil and gas equity analyst with rating firm Standard & Poor's.

"Companies want refineries that are larger, more nimble and more flexible, with the ability to handle a wider range of crude-oil feedstocks," Vital said. "With the recession, a lot of refineries worldwide will have to permanently shut down."

Chevron is seeking approval to upgrade and modeA sales tax exemption for California's cleantech producers will help the state retain and expand a competitive advantage in a growth industry, Gov. Arnold Schwarzenegger said Wednesday during a visit to a solar-panel manufacturer in Richmond.

"Jobs, jobs, jobs," Schwarzenegger said. "What is good for the environment is also good for the economy, and this is a perfect example here."

The governor toured SunPower Systems' facility in Richmond's historic Ford building. The manufacturer is one of the world's top producers of solar power systems.

The Richmond facility now employs about 250; it soon hopes to grow to about 350.

"That is incredible, in this economic downturn," Schwarzenegger said. "The question is, will this be good for California families, or will it be good for Arizona families? Or Texas families?"

The need to keep high-performing green businesses in California ranks among the governor's priorities, he said, which is why he included a proposal to make clean technology producers such as SunPower exempt from paying sales tax on their equipment a component of his California Jobs Initiative.

"We want our green businesses to stay in Richmond," Mayor Gayle McLaughlin said. "We think we can turn the tide and continue this economic development."[emphasis added]

Other speakers included representatives from trade unions, the Silicon Valley Leadership Group and state Labor Secretary Victoria Bradshaw.

Karl Fischer at 510-262-2728. Follow him at Twitter.com/kfischer510