Providing coverage of Alaska and northern Canada's oil and gas industry
August 2015

Vol. 20, No. 35 Week of August 30, 2015

Irving upgrades refinery, cuts rail deliveries


For Petroleum News

Canada’s largest oil refinery owned and operated by Irving Oil in New Brunswick is getting a C$200 million upgrade, partly with TransCanada’s planned Energy East pipeline in mind, at the same time the facility has lowered its dependence, likely over the short-term, on rail to deliver crude feedstock.

The refinery at Saint John will cut its processing of 300,000 barrels per day of crude in half during the 60-day Operation Falcon project to improve safety and reliability of the facility for the next six years.

The primary objective is to produce fuel that meets new vehicle emission and fuel standard rules in the United States, where the majority of the refinery’s products are sold.

The U.S. Environmental Protection Agency has set new standards which lower sulphur content in gasoline in 2017 to meet more stringent vehicle emission standards.

The refinery is also the final destination for the controversial C$12 billion Energy East pipeline, which is designed to ship 1.1 million barrels per day of heavy and Bakken crude from Western Canada to refineries in Ontario, Quebec and New Brunswick, with some destined for export from two terminals.

Privately held Irving Oil is taking advantage of the maintenance work to prepare for Energy East volumes or any future upgrades, said Mark Sherman, the company`s vice president.

He said that although the turnaround is not directly related to Energy East, Irving wants to take advantage of the work “to bolt on ...a good, reliable operating entity.”

“This is really about making sure, whether we do any future investment or not with major projects, you need to make sure that the operation today is safe and reliable,” he said

On the safety issue, he reported that in the two years since the train derailment and explosion that killed 47 residents of Lac Megantic in Quebec the amount of crude arriving by rail at the refinery has dropped to 10 percent from about 33 percent.

He said Irving is currently receiving about 20,000 to 25,000 bpd of crude from Western Canada, some of it synthetic crude from the Alberta oil sands.

The Lac Megantic train was carrying about 50,000 bpd of Bakken crude from North Dakota.

Sherman did not rule out a return to greater use of rail tank cars, noting that decisions on the mode of transportation are “market driven” and if price spreads between West Texas Intermediate and Brent crude “make it viable.”

Bridget Hunsucker, an analyst with Genscape, expects a strong return to crude-by-rail businesses across North America because of investment in rail terminals, especially in Western Canada.

In recent earnings calls, several companies - U.S. Development, Valero and PBF Energy - mentioned they expect rail volumes to make a comeback in the fourth quarter, she said, adding “I don’t think it’s going away any time soon.”

Petroleum News - Phone: 1-907 522-9469 - Fax: 1-907 522-9583
[email protected] --- http://www.petroleumnews.com ---

Copyright Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA)©2013 All rights reserved. The content of this article and web site may not be copied, replaced, distributed, published, displayed or transferred in any form or by any means except with the prior written permission of Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA). Copyright infringement is a violation of federal law subject to criminal and civil penalties.