Potential buyer makes plea for refinery to be kept in ‘warm idle’ mode to allow for quick restart
The owner of the idled Come By Chance oil refinery has asked the utility regulator in Newfoundland and Labrador to “expeditiously” increase certain fuel prices.
That’s because the company says its costs to supply the market have spiked since the Placentia Bay facility stopped refining oil earlier this year, and fuels now have to be imported.
Meanwhile, a U.S. company with its sights set on the refinery is issuing a plea that the facility be kept in “warm idle” mode so it can more easily be reactivated if a change of ownership occurs.
“Time is of the essence to ensure a restart plan can be put in place for next year,” a representative of Origin International said on condition of anonymity.
“Origin is finalizing a plan that would have all employees back to work immediately after a transaction, with a restart for the plant in the second quarter of next year.”
Collapse of sale to Irving Oil
These are just the latest in a whirlwind of events to affect the troubled refinery this year.
The facility supplies the vast majority of fuels throughout the province, has contributed up to five per cent of the province’s economic output, and sustained up to 500 direct jobs in eastern Newfoundland.
But the refinery was placed on standby mode in late March because of the global pandemic and resulting collapse in oil markets.
A proposed sale to Irving Oil fell apart at the last minute earlier this month, and the New York-based investment management firm the owns the refinery, Silverpeak, has said it will close the operation permanently if a viable path forward cannot be found.
Such a scenario would be a devastating hit for a provincial economy that is already reeling from the the double blow of a global pandemic and an economic crisis.
Sources have told CBC News the refinery owners have requested financial help from the provincial government to keep critical components operational, since a full shutdown would reduce the refinery’s attractiveness to a potential buyer like Origin.
CBC News is awaiting confirmation on this from the province’s Energy Department.
100 per cent of fuels now imported
And now there could be another consequence amid all the uncertainty, one that could make it more expensive to drive a vehicle and heat buildings.
The marketing division of North Atlantic Refining Corp., NARL Marketing Limited Partnership, wrote the Public Utilities Board on Oct. 5, asking the board to approve an undisclosed increase in the wholesale prices of gasoline, diesel and furnace oil.
A redacted version of the company’s application to the PUB, which was signed by North Atlantic CEO David Button, was obtained Thursday by CBC News.
North Atlantic said it has been importing refined fuels into the province from New York and Europe for the past six months.
As such, the company says its costs have increased due to shipping, inventory financing and hedging costs, use of a third-party fuels terminal, and the “sizable economic loss” of not being able to blend its own butane gas.
Subsidized fuel prices
What’s more, Button said the current wholesale markups established by the board are based on having an operating refinery in the market.
As such, he is calling on the PUB to “urgently” review fuel prices to reflect the fact that 100 per cent of refined fuels are now imported.
It’s not clear how much of an increase the company is seeking, because that information is blacked out.
A spokesperson for the PUB said North Atlantic’s application is before the board, and there is no timeline for a decision.
Button said having to import fuels changes the economics of the business.
“It is evident that Newfoundland has been receiving subsidized fuel prices from the refinery for years, given local fuel production.”
There are three active terminals in Newfoundland where fuels can be imported. They include North Atlantic’s facility in Come by Chance, an Irving-owned terminal in St. John’s, and a Corner Brook facility owned by Imperial Oil.
Since North Atlantic supplies a majority of the refined fuels, it has to keep a “significant inventory” on hand, Button wrote.
North Atlantic is asking the board to “expeditiously” increase prices as an interim step, and make further adjustments following a more comprehensive review “to reflect the costs of importing all fuels to the island.”
The company also wants its proposed increases to apply to all fuel suppliers “so that all players are on a level player field, ensuring the viability of terminals and a long-term reliable supply for the province of Newfoundland.”
Origin making waves
While all that plays out, a private U.S. company that specializes in recycling oil is stirring the pot.
Origin International is pledging to resume the processing of various fuels at the Come By Chance refinery and hire the same or more personnel than worked at the facility before the pandemic.
“Origin has a long-term vision for the plant and wants to be partnered with the province and local community,” a representative for the company said.
“Local family livelihoods are at stake. Origin’s plan will bring increased jobs to the island and protect the environment for future generations. The positive economic ripple effects of Origin’s plan will benefit the region in the short and long term significantly.”
The spokesperson said the provincial and federal governments have a play a role in any strategy to reactivate the refinery.
“We believe the provincial and federal governments understand this,” said the spokesperson.
There have been whispers that the refinery site could be downgraded to an import terminal, with no refining activity, but the Origin spokesperson said that could have “unfavourable outcomes” for the province and the community, “including permanent job losses, increased fuel prices, and potentially unresolved environmental liabilities.”
Source: CBC| This text was excerpted from the media outlet cited on October 22, 2020 and is provided to Noia members for information purposes only. Any opinion expressed therein is neither attributable to nor endorsed by Noia.