Tesoro Logistics LP will build a single-distillate desulfurization unit (DDU) for converting various feedstocks into ultra-low sulfur diesel (ULSD) fuels at both its Wilmington, California, refinery, with a capacity of 97,000 barrels (bbl.) per day, as well as the adjacent 266,000-bbl.-per-day Carson, California, refinery it just acquired from BP.

Tesoro said it paid BP $1.075 billion for the Carson refinery plus some 800 retail fuel stations, a cogeneration plant and a coke-calcining operation. The deal also requires Tesoro to pay roughly $1.3 billion for hydrocarbon inventories.

The agreement to build a DDU was a key part of a May 17 agreement with California Gov. Jerry Brown (D), the California Energy Commission and the California Attorney General, in order to win regulatory approval for the BP refinery acquisition.

The U.S. Federal Trade Commission simultaneously announced that it also approved Tesoro’s acquisition of the BP refinery.

“Tesoro has stated that the [BP Carson refinery] acquisition will enable it to achieve significant synergies, some of which will benefit the environment by lowering greenhouse gases and emissions,” according to the California Attorney General’s official letter explaining her approval of the BP refinery acquisition.

“Specifically, Tesoro has stated that the acquisition will enable it to install a single-DDU for both the Carson and Wilmington refineries.

“The California Air Resources Board [CARB] has studied this issue and has concluded that the installation of a DDU for the combined facility would result in a reduction of emissions and greenhouse gases.

“Additionally, Brown sent a letter to Tesoro on April 8, 2013, stressing the importance of installing a DDU should the acquisition proceed.

“Tesoro has committed to provide [the Attorney General’s] office with an annual progress report detailing the steps it has taken to realize the synergies resulting from the acquisition, including the installation of a DDU, so that we can monitor its commitments to lower greenhouse gases and emissions.”

The Attorney General also noted that both the Carson and Wilmington refineries employ fluid catalytic cracking (FCC) to convert gasoil into intermediates. “The FCC units produce much lower cracking yields and result in higher emissions and greenhouse gases than a DDU,” according to the Attorney General.

Tesoro Answers to Questions
Asked for more details about the DDU plans, Tesoro told Diesel Fuel News (DFN) the following on May 21:

DFN: Please explain what exactly is this DDU?

Tesoro: A DDU is a Distillate Desulfurization Unit that removes sulfur impurities from hydrocarbon streams in the refinery system—specifically, streams in the diesel boiling range to manufacture CARB diesel and ultra-low sulfur diesel.

DFN: Is the DDU a hydrotreating unit, whereby Tesoro can take various streams such as vacuum gasoil, coker gasoil or other high-sulfur distillates and produce ultra-low sulfur diesel (CARB ULSD) and/or ultra-low sulfur kero-jet? Or is it a hydrocracking unit?

Tesoro: It is a hydrotreating unit (rather than a hydrocracking unit).

DFN: Will the installation of this DDU unit enable Tesoro to produce more ULSD and/or ultra-low sulfur kero-jet—and if so, then roughly how many incremental bbl. per day?

Tesoro: It is to treat distillates. The size of the DDU has not been determined at this point; detailed engineering will occur during integration.

DFN: Would Tesoro shut down any FCC units as a result of installation of the DDU?

Tesoro: We propose to shut down the FCC at the Wilmington refinery.

DFN: Is there a capital cost estimate for this DDU?

Tesoro: Engineering has not been completed to estimate the cost.

DFN: When would this DDU go online?

Tesoro: That is subject to engineering and permitting.

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