The Philadelphia company, which owns two refineries in Pennsylvania, announced plans to sell those refineries and focus on its pipelines and retail gas stations that provide a steadier cash flow.
"We have made progress in increasing the efficiency of our refineries over the last several years, but given the unacceptable financial performance of these assets, it is clear that it is in the best interests of shareholders to exit this business," Lynn Elsenhans, Sunoco's chairman and CEO, said in a statement.
The announcement came as a surprise to many of the 1,500 workers at the two facilities here. The United Steelworkers represent about 1,000 of them.
"it's a significant impact, there's a lot of uncertainty now for people who have dedicated their lives to making this company successful," said Jim Savage, president of USW Local 10-1.
Sunoco's refineries in Philadelphia and Marcus Hook, Pa., can process a combined 505,000 barrels of oil per day. If it cannot sell its refineries, the company will shut down its main processing units in July 2012.
Sunoco officials wouldn't comment on camera, but spokesman Tom Golenbeski said the company's refineries in the Northeast have lost nearly $800 million in the past two years.
Industry analyst Stephen Schork says geography is part of the problem. Refineries in the middle of the country have better access to cheap crude oil, while Sunoco here imports more expensive crude from Africa.
"Bottom line is they're buying very expensive crude oil and they're not selling it at enough of a premium to make the business work," Schork said.
Sunoco values the two refineries at between $1.9 and $2.2 billion dollars. Schork says he doubts anyone will bid anything close to that and the impact on the local economy could go far beyond the refineries' 1,500 jobs.
"Most of these restaurants around here, the hoagie shops, the pizza shops, Wawas, gas stations, all depend on all of them coming in and out of here," Schork said.
The move is one more step in a major transformation for U.S. refining. Marathon Oil Corp. and ConocoPhillips decided to distance themselves from refining, announcing plans earlier this year to spin off their downstream businesses.
Analysts say that the moves reflect a greater distaste for the volatility that comes oil refining. Refineries are only profitable when a company can sell refined petroleum products for a higher price than the crude oil it buys as a feedstock. That's not always the case.
