Back in 2008, entrepreneur Demetrios Haseotes walked away from a chance to buy a boutique oil refinery in Somerset. However, opportunity knocked a second time when the property came up for sale again in 2011, and this time the convenience store group owner took the plunge.
He’s investing millions to reopen the petroleum refinery and serve the local oil production market in Southeast Kentucky under the banner of Continental Refining Inc.
Haseotes invested $1,175,500 in a refinery that has an estimated replacement cost of $60 million, according to published reports. This time the price was right, both for the refinery and in the petroleum market.
“Somerset is in a good niche location, and it has a lot to do with the fact that there’s crude oil produced in Kentucky. That is the primary reason why I focused on Somerset and not other facilities,” Haseotes said during a spring visit to Kentucky from his upstate New York home. “At $100 per barrel for crude oil, everyone will drill for it, so we will have plenty of supply.”
In addition to the 7,200 barrels per day of crude oil produced within a 100-mile radius of Continental Refining, the company will have access to 45,000 barrels per day in neighboring oil-producing states, according to U.S. Energy Information data. The refinery can refine 5,500 barrels of crude a day at full operation. It has a storage capacity of 107,000 barrels of crude and refined oil products to serve the local bulk-fuel market.
The reopening is good news for local oil producers.
“It’s encouraging that Continental is getting the refinery up and running again,” said Kim Collings, director of the Division of Oil and Gas Conservation of the Kentucky Department of Natural Resources.
The refinery produces regular gasoline, heating oil, diesel and residual products. One product for international markets is bunker diesel fuel for ships, and Haseotes said the Somerset refinery would be one of the few that can produce that fuel while meeting environmental standards without additional blending or processing. About two-thirds of the overall production will be sold to local bulk fuel marketers.
Oil in his veins
A native of Rhode Island, Haseotes has been involved in various aspects of the petroleum business since 1980, including being an owner and past director of the Cumberland Group of Companies, which include Cumberland Farms Inc. and Gulf Oil LP. He was involved in convenience store operations as well as gasoline facility construction and store site selection and planning.
He earned a bachelor of science in management from Bryant University in 1990. Since 1993, he has been president/CEO of Hemisphere Management Corp. based in Menands, N.Y., a city that adjoins the state capital of Albany. Starting with a single gasoline location in Marshfield, Mass., he has grown Hemisphere into more than 33 gasoline, convenience and truck stop locations between New England and Florida.
In 2002, Haseotes launched Midland Farms Inc. By 2005, sales of the company’s private-label juice and dairy brands reached $25 million.
Investing in the future
After purchasing the Somerset refinery, Haseotes is pouring in an additional $10 million for a significant maintenance turnaround. Continental will return to operations this summer and plans to achieve full capacity within two years. The refinery was shuttered for two years, so the new owner wants to make sure it’s ready to fully function again.
“You just don’t shut it down once you start, and we’ll run for about 18 months straight after we restart,” Haseotes said.
The Somerset Oil brand gas stations associated with the refinery in the past were not part of the deal, but Haseotes said he plans to use his experience to develop retail locations for the refinery’s products.
The location of the refinery will save area oil producers money because they won’t have to transport their crude as far as to reach other refineries. And Haseotes is looking forward to working with local producers and becoming a part of the business community.
“To not be from Kentucky and get such a positive reception is, frankly, a refreshing surprise,” he said.
Kentucky’s other refinery
Meanwhile, the Marathon Petroleum Co. refinery in Catlettsburg is the 31st largest in the country, producing about 2 percent of the gasoline made in the United States.
It became part of Marathon in 1998, when the Findlay, Ohio-based oil company took over the former Ashland Inc. refinery situated on 650 acres near the confluence of the Big Sandy and Ohio rivers.
The refinery was built in 1922 and acquired by the Ashland Refining Co. – later Ashland Inc. – in 1924. It underwent a major expansion in World War II to support the war effort. It uses both sweet and sour crude oils to produce 233,000 barrels per day of gasoline, diesel, jet fuel, asphalt, propane, heavy fuel oil, propylene, cumene, tolune, butane and sulfur.
The operation employs about 800 direct employees and approximately 700 contract workers. Oil arrives by pipeline and barge, and finished products depart via truck, rail, pipeline and barges.
The refinery is one of six in the Marathon system, which overall produces 1.19 million barrels of product a day.