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Tesoro fire started with exchanger failure

By Erwin Seba

HOUSTON (Reuters) - A deadly fire on Friday at Tesoro Corp's Anacortes, Washington, refinery was due to a catastrophic failure of a heat exchanger, sources familiar with the investigation of the blaze said on Monday.

The heat exchanger that failed was operating while seven workers were working on another exchanger. The workers were caught in the near instantaneous eruption of the blaze, the sources said.

A Tesoro spokesman said it was too early to determine causes of the fire.

"It is much too early in the investigation to make definitive statements about causes at this point," said Tesoro spokesman Lynn Westfall.

Five workers have died and two remain in a Seattle hospital from injuries received in the blaze, which has cut the refinery's clean gasoline and diesel output to a third of normal, sending Pacific Northwest wholesale gasoline prices up more than 10 cents.

CAUSE OF FIRE

"The fire occurred due to a catastrophic failure of a heat exchanger," said one of the sources. "It was not the heat exchanger being put back into service. It was an exchanger next to the one being worked on. It was in operation."

A heat exchanger heats cold hydrocarbon feed going to a refining unit while cooling hot hydrocarbon material coming from the same unit.

The heat exchanger being worked on was part of a naphtha hydrotreater, which removes sulfur from low-octane naphtha before it is converted to a high-octane additive for gasoline.

"Hydrogen and hydrocarbons were released in a near-instantaneous explosion," said another source describing what happened at the fire's start.

Of the two workers in the burn ICU unit of Seattle's Harborview hospital, one was upgraded from critical condition to serious, said a hospital spokeswoman.

Both men are improving and "are aware of their surroundings and responding to stimulus," Westfall said.

MARKET REPERCUSSIONS

Wholesale gasoline in the Portland, Oregon, market sold on Monday at 4.75 cents per gallon over May NYMEX RBOB gasoline, West Coast refined products traders said. Portland gasoline finished on Thursday at a 6-cent discount to May RBOB.

On the New York Stock Exchange, Tesoro's share price fell 78 cents, or 5.78 percent, to $13.61 per share, as Wall Street analysts downgraded the company.

Deutsche Bank in a research note issued Monday rated the company a hold.

"The financial repercussions for Tesoro shareholders are more likely limited to the issue of management credibility, but clouded anyway by the change of the recently announced new CEO Greg Goff," according to the Deutsche Bank note.

The note also said its difficult to evaluate the safety performance of refiners.

"We'd welcome any move by the government regulators now investigating the Anacortes incident to assist Wall Street analysts to analyze oil company safety records," Deutsche Bank said.

(Editing by David Gregorio)

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