June 20, 2013:

Did talk of creating a west-east pipeline come too late to save a Dartmouth oil refinery?

Some observers, including the premier, have wondered whether the 95-year-old operation could have hung on until a plan to ship lower-cost Alberta crude across the country materialized. Premier Darrell Dexter said he asked Rich Kruger, Imperial Oil’s chairman and chief executive officer, that very question Tuesday. “I did ask, and the indication I had was it made no difference one way or another,” Dexter said Thursday. “They don’t process Canadian crude so it really made essentially no difference in their decision.” Imperial Oil announced Wednesday that the facility will be turned into an import storage plant by the end of the year. The refinery will be dismantled over a number of years, while the converted terminal will store and distribute petroleum products refined elsewhere.  The downsizing of the Dartmouth operation will have an impact on many of Imperial’s 200 local employees, as well as some 200 contract workers. The terminal operation will employ 40 to 45 Imperial workers, as well as some contractors. Imperial officials said TransCanada Corp.’s potential project wouldn’t have been enough to make the small, aging refinery more competitive. “The minute that crude hits tidewater, it finds the international market price,” Gilles Courtemanche, the company’s vice-president and general manager of refining and supply, told reporters Wednesday.

“If you look at the current disconnect, if you will, or spread that we see in the marketplace, that is not a sustainable scenario.” But an Oshawa analyst said access to a cheaper western feedstock might have worked in the refinery’s favour, although Imperial — which is majority owned by ExxonMobil — probably couldn’t wait that long. “They just said, ‘We cannot continue using a Brent crude, which is priced much higher than our competitors in the Midwest. Our other refineries in the ExxonMobil family are doing much better. Therefore, we’re going to cut out the weak ones.’” said Roger McKnight, senior petroleum adviser for En-Pro International. TransCanada has yet to decide whether to convert an existing 3,000-kilometre natural gas pipeline to carry crude to Quebec. The so-called Energy East Pipeline plan includes the possibility of a 1,400-kilometre extension to Saint John. That’s where Canada’s largest refinery, Irving Oil’s 350,000-barrel-per-day facility, is located. Halifax energy executive Phil Knoll agreed it’s unlikely the Dartmouth refinery could have hung on for potential lower-priced western oil instead of relying on tanker shipments.

“The pipeline is, optimistically, five years away,” he said. “If you’re a refinery and you’re not economically efficient now, five years is a long time. Can they 100 per cent count on it being ready in five years? I don’t think so.” Calgary-based TransCanada has said the project, if it goes ahead, could begin shipping as much as 850,000 barrels of oil per day to eastern markets by late 2017. But in the meantime, Imperial will close the Dartmouth refinery, and convert it to tank farm instead, after being unable to find a buyer over the past year.  The 88,000-barrel-per-day operation has been up for review since May 2012.  The import terminal will include existing Imperial depots in Sydney, Corner Brook, N.L.; Sept-Iles, Que.; and Cap aux Meules in Iles-de-la-Madeleine. Imperial Oil officials were also asked about other measures seen as potential lifelines for the refinery, ranging from municipal tax breaks to shale oil imports from Texas. But Courtemanche said a combination of market factors resulted in the processing operation no longer being viable. “The result of the marketing efforts illustrate the challenges of operating a refinery of Dartmouth’s scale and configuration in the very competitive conditions of the Atlantic Basin market,” he said.  The company spent hundreds of millions in recent years to make the refinery more efficient, the vice-president added.

By Herald Business