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It’s Saint John and don’t forget it Small Atlantic Canada city bids to become a N.A. energy hub, with plans for a 2nd refinery, work under way on LNG terminal Gary Park For Petroleum News
From the beginning of time it’s been confused with St. John’s, Newfoundland.
But there could be a role reversal in the making for Saint John, New Brunswick.
It’s being touted by its own economic promoters as a new North American energy hub, which is only a partial overstatement if the projects now on the table make it through the approval and construction phases.
Until now, it’s too bad Saint John (metropolitan population about 120,000) has lived in the shadows of St. John’s (population about 170,000).
The privately held Irving family resources conglomerate has done what it could to put its New Brunswick base on the map, but that’s nothing alongside what it has in store.
Second refinery being studied Irving Oil is just a few months away from completing a raft of studies that will determine whether it will proceed with a 300,000 barrel-per-day refinery — the first greenfield refinery in North America in a quarter century.
That coincides with the work already under way on Canada’s first liquefied natural gas terminal — a partnership with Spain’s Repsol that should start regasifying 1 billion cubic feet per day of LNG imported by Repsol in 2009.
For about 46 years, Irving has operated Canada’s largest refinery at Saint John, with crude capacity of 280,000 bpd and turning out 300,000 bpd of refined products, exporting 175,000 bpd to the United States Northeast, including 100,000 bpd of reformulated gasoline. That volume represents 64 percent of Canada’s petroleum exports and 19 percent of U.S. imports.
The company is now engaged in market and feasibility studies and searching for a partner — either on the supply side or as an equity stakeholder — to build a second refinery, doubling its output.
Uncharacteristic of Irving’s style, its new refinery plan was flushed out through media reports that it has acquired 3,000 acres near the established refinery, of which about 400 to 500 acres would be needed for a refinery.
Irving President Kenneth Irving said in a statement that the plan is an “attractive investment for companies to respond to the call for more North American refining capacity.”
Refinery cost pegged at C$5-C$7 billion Although the details are sketchy, Irving said the refinery could take “several years” to build at a cost of C$5 billion to C$7 billion.
It is basing its case for an expanded role in the volatile refining sector on an argument that more than half of the U.S. Northeast’s refined products come from the Gulf of Mexico, which it notes is vulnerable to storm-related disruptions.
Saint John, it says, has an ice-free deepwater port that offers safe, reliable and secure supplies to ease the vulnerability of the Northeast to short-term and spot-market arrangements.
There were cautionary notes from analysts.
Michael Ervin, president of energy consultant M.J. Ervin & Associates told Petroleum News that although many proposals for new or expanded refineries “never see the light of day” Irving has a track record of delivering.
He also said the desire by Irving to open a new refinery illustrated the company’s apparent belief that it “feels the risks are tolerable and manageable.”
However, Ervin said there are significant potential risks, such as predicting market conditions several years away, or the prospect that governments might impose expensive changes to the way gasoline is formulated.
To that end, he said it is important for Irving to find a partner to share the capital costs and financial gamble.
Two smaller operations would be challenged If the project does get a green light it poses a challenge for two smaller operations in Newfoundland.
In August, Harvest Energy Trust pulled off a surprise when it acquired North Atlantic Refining’s Come By Chance plant from Swiss-based Vitol.
The refinery currently processes 115,000 bpd of mostly sour feedstock from the Middle East, Russia and Latin America and has indicated it is considering a coker unit to process heavier crude.
Harvest Vice President Jacob Roorda told Petroleum News the trust believes having a refinery that is running and making cash gives it a “huge advantage” over proponents of several million barrels of new refining capacity now under consideration.
“We can’t control the competition,” he said. “We’ll just take our chances.”
Separately, Newfoundland Labrador Refining expects to complete a detailed review in December of the marketing, design and cost aspects of its plan to build a C$4 billion refinery at Placentia Bay, Newfoundland.
The company’s marketing director Brian Dalton said the deepwater port offers compelling transportation advantages and convenient access to both U.S. and European markets to improve its scales of economy.
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