Five Questions with Eric Wright of Par Hawaii

Mar 17, 2021

A long-planned transition of power at Par Hawaii, operator of the state's only petroleum refinery, took place amid a global pandemic that forced some significant changes to its dealings.

After serving four years as an understudy, new head executive. Eric Wright took over for his mentor, Jim Yates, on Jan. 1, and has had no shortage of things to address coming off an unprecedented year of drop in fuel demand — one that caused over $400 million in net losses in 2020 for Houston-based parent company Par Pacific Holdings, LLC. Over the last year, Par cut 5% of its Hawaii workforce, idled its Par West refinery — all of its production here now runs through Par East — released a fuel barge from service in Honolulu Harbor, and did a leaseback sale of 22 Hele- and 76-brand gas stations and convenience stores to increase its liquidity.

Par also renegotiated contracts with customers like Hawaiian Electric and Hawaii Gas to help it get by. “We survived 2020, which wasn’t easy to do,” Wright told Pacific Business News in a recent half-hour Q&A session. “It was probably the biggest disruption in the history of the fuels market in the past 100 years.” But Wright's optimism is high for a 2021 recovery. During a PBN interview, he touched upon renewables, carbon policy, and the rate at which Hawaii is recovering.

Also this week, Par Pacific (NYSE: PARR) announced a public stock offering of 5 million shares at $16 per share. Wright said the sales proceeds will go toward "capital expenditures, repayment or refinancing of indebtedness, acquisitions and repurchases and redemptions of securities."

How’s it been managing things since January?

I think things are on the upswing now. We idled one of the plants last year [Par West] at Kapolei. But the plant that is running, Par East, the old Tesoro refinery that we bought here back in 2013, is running all out. It’s running at as high of levels as it ever has [throughput of 80,000 to 90,000 barrels a day].

We can sell all of that production here in Hawaii, which is what you want. We have offtake for it. You don’t want to really be importing crude to Hawaii, and exporting product. When you’re in the middle of the Pacific, that’s not a good business model. We just have to continue to operate safely, efficiently, and environmentally responsibly, and eventually the fuel margins will come back and we’ll be sitting at a nice place.

What is the future of the Par West Facility?

What we’re focused on right now is a lean operation, keeping our expenses down.

And so we’re really focused on maintaining and investing in the Par East facility, and minimizing our spend on the Par West. There’s certainly some option value there, if margins come back or we find a way to repurpose that equipment.

But even if we were to pursue a renewable project of some kind, I foresee that happening at the Par East facility rather than West, because that’s where all of our people are, and our staffing. I think that’s going to be a more efficient approach.

How far off could a green energy pivot be for Par given Hawaii's 100% renewables mandate by 2045?

I think that you start out by recognizing that there’s going to be a need for a refinery in Hawaii for a pretty significant period of time. How many years that is, I can’t say. But we are supplying the utilities with very significant amounts of fuel today. There is really not a commercially viable alternative to jet fuel today. There’s a lot resources going into that area; I anticipate at some point in time there will be [a viable alternative]. But it’s going to be many years, if not decades, before we’re there.

Hawaii has to import a fair amount of its jet fuel, and the same is true of gasoline. So there’s a layer of demand that can go away, and it’s really not going to affect our operation. The imports will be backed off, and we’ll still be able to place our local production. So I think there’s a good local case for the refinery for years to come.

But decarbonization is accelerating. It’s important to society, and we know we can’t ignore that. We need to be part of that. If our customers are asking us for sustainable aviation fuel or renewable diesel, we have to be ready to step in and provide that, or somebody else is going to and undermine our business. So those calls are starting. We’re getting more and more interest in those types of fuels. But it’s still early; we don’t have a national carbon policy. So I think we’re still sort of in that early phase of the transition.

Are there smaller-scale renewable projects you can invest in in the near term?

Absolutely. We are forming a lot of local relationships. We have a close relationship with Hawaiian Electric; they are one of our big customers. They have an unregulated unit called Pacific Current that’s out in the market looking for investment opportunities. If they were to do something and approach us, that would be something we’re interested in exploring.

We recently joined the Sustainability Business Forum of Hawaii Green Growth. Several local CEOs are involved in that; that’s a potential forum to exchange ideas on investment opportunities.

It's too early to point to anything specific at this time, and really we’re coming out of this difficult period for our business. As conditions improve, that’s very much going to be a focus — investing in sustainable business projects.

How do you feel about the possibility of stricter carbon measures being installed by the Biden Administration?

The first thing I would say is that we support a national carbon tax. We think that it will help our business. It will provide some certainty that doesn’t exist today. It will avoid kind of a patchwork setup where you have different states doing different things.

We’d really like to see a consistent set of regulations across [our facilities in Hawaii and Tacoma, Washington], and across the nation. We think that’s going to provide some support for investment.

The Climate Leadership Council plan a, that’s something we support — raising carbon tax over time with a dividend back to the American people, and really simplifying the regulations overall related to federal climate policy. Mr. Wright, is an avid outdoorsman who along with his wife Jill are raising three children and take every opportunity to get out and enjoy Hawaii’s natural beauty.