Newfoundland refinery to idle operations on virus concerns
Newfoundland’s Come-by-Chance refinery will be the first to close in North America due to the novel coronavirus pandemic as refineries worldwide cut back operations.
The refinery’s owner, North Atlantic Refining Ltd., confirmed on Monday that it told stakeholders it was pausing production because of concerns about worker safety as the virus spreads.
Refineries around the world have shut units or cut back to minimum processing levels due to slumping demand, as the pandemic has caused the global aviation industry to virtually shut and motorists to stay off the roads.
Overall global fuel demand is expected to drop by 20 per cent to 30 per cent in April and remain weak for months after that.
“It is not difficult to see run cuts of 10 mmb/d (million barrels per day) soon, perhaps peaking at 15-20 mmb/d at the height of the pandemic. This is likely to force some refineries to close down, while others will reduce rates severely,” analysts at research firm FGE said in a note on Monday.
So far, the refineries that have shut down are smaller operations. Come-by-Chance, located in Newfoundland and Labrador, can process up to 130,000 barrels per day. Last week, Italy’s API shut its 85,000 bpd refinery in Ancona, the first to close in Europe, due to demand concerns.
Come-by-Chance will maintain a reduced workforce, the company said in a statement that went out late on Sunday. The refinery supplied products to major harbours on the U.S. East Coast including New York and Boston.
The length of the shutdown at Come-by-Chance is unclear.
“While we have no cases of COVID-19 at the refinery, our actions are consistent with the advice of public health officials to further prevent the spread of the COVID-19 virus,” it said.
Numerous refineries worldwide, including India’s IOC, Phillips 66 and PBF Energy Inc in the United States, and several units in Brazil and Venezuela have already cut production.
Several U.S. refineries have stopped using contractors that were performing maintenance work, and others, including Delta Air Lines’ Trainer, Pa., refinery, are operating with smaller staffs.
The refinery closure comes as global oil benchmark Brent crude fell to its cheapest in 18 years on Monday, while U.S. crude briefly dived below US$20 per barrel, on rising fears the global coronavirus shutdown could last months and demand for fuel could dip further.
With Saudi Arabia and Russia set to flood the market with oil next month, producers and shippers have been scrambling to lock oil up in storage as demand falls. Meanwhile, the coronavirus pandemic is expected to cause at least a 20 per cent drop in fuel demand worldwide as governments take steps to restrict the spread of the virus. Brent futures fell US$2.17, or 8.7 per cent, to settle at US$22.76 a barrel, their lowest close since November 2002, while U.S. West Texas Intermediate crude fell US$1.42, or 6.6 per cent, to US$20.09, the lowest close since February 2002.
The price war between Saudi Arabia and Russia erupted earlier this month after the collapse of a three-year deal to limit supply between the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Moscow.
Bank of America lowered its oil price forecasts for the second time in two weeks after its economists projected global GDP would contract in the first half of 2020.
“On a quarterly basis, we expect to see the steepest decline in global oil consumption ever recorded,” BofA analysts said, reflecting a 12 million barrel per day drop in the second quarter of 2020 and a 4.5 million-bpd contraction for the year.
BofA reduced its 2020 price forecasts to US$37 per barrel for Brent and US$32 for WTI. It said it expects both benchmarks will trade in the teens in coming weeks.
Our actions are consistent with the advice of ... health officials to prevent the spread of ... COVID-19.