N.L. refinery a ‘building block’ for Irving
As sole refiner in Atlantic Canada, N.B. company sees strategic benefits
CALGARY One of Canada’s richest families is buying Newfoundland and Labrador’s only oil refinery, which will be a “building block” in a larger strategy to process more Canadian oil.
Saint John, N.b.-based Irving Oil announced Thursday plans to buy North Atlantic Refining Corp. and its Come By Chance, Nfld. refinery from New York-based investment firm Silverpeak for an undisclosed sum, which marks the seventh time the refinery has changed hands in its storied history.
The deal is subject to conditions, including a Competition Bureau review, but it would make family-controlled Irving Oil the only refinery operator in Atlantic Canada. The deal comes weeks after Irving Oil secured permission to bring western Canadian to the East Coast and forms part of a larger strategy to strengthen its business, according to a company spokesperson.
Last month, Irving Oil obtained Transport Canada’s approvals to source western Canadian oil from the West Coast, through the Panama Canal to its refinery in New Brunswick.
“Our recently announced plans to source Canadian crude oil and today’s announcement in Newfoundland are two building blocks that fit together with our company’s existing strengths,” Irving spokesperson Candice Maclean said in an email. “All of these elements contribute to our longtime objective of helping Canada be even more competitive in the international landscape.”
Maclean also said Irving, which owns a 320,000 bpd-refinery in St. John and a 71,000-bpd refinery near Cork, Ireland, has been investing for years “in the broader Atlantic Basin and have continued to pursue opportunities for growth in these regions, including Atlantic Canada.”
Analysts believe the Come By Chance refinery and associated retail fuel station network in Newfoundland and Labrador are a strategic fit for Irving, which operates fill-up stations across Atlantic Canada and the U.S. Northeast.
Irving operates a distribution network in Newfoundland including its flagship Big Stop trucking stations in multiple locations across the province.
“It makes sense that they would see a benefit to acquiring the Come By Chance distribution and retail assets,” IHS Markit oil markets, midstream and downstream analyst Susan Bell said in an email.
She said the Come By Chance refinery has been challenged historically because it has been prohibited from selling fuels into the broader Canadian market beyond Newfoundland.
Originally built with federal and provincial money between 1970 and 1973, the refinery only operated for a few years before going bankrupt in 1976. Petro Canada bought the refinery, then dubbed the “biggest lemon in the world” according to Memorial University archives, for $10 million in 1980. The Crown corp. couldn’t turn a profit on the facility either and sold it for one dollar to Newfoundland Energy Ltd. in 1986.
The refinery would change hands again and again. Swiss commodities trader Vitol SA sold the facility to Calgary-based Harvest Energy Trust for $1.6 billion in 2006. Harvest, in turn, sold itself to Korea National Oil Corp. for $4.1 billion in 2009.
The refinery changed hands again in 2014 when Silverpeak, then called Silverrange Financial Partners, bought the facility and invested in expansions. The refinery was initially built to process 100,000 barrels of oil per day but now, according to Irving ’s release, is a 135,000-bpd refinery. In 2019, the previous owner of the refinery had applied to further expand the facility to process 165,000 bpd.
A spokesperson for Silverpeak declined to comment while the sale is still pending. North Atlantic Refining was the firm’s main energy holding, though it also owns a joint-venture in Peru.
Historically, the top five foreign sources of oil to that refinery in Newfoundland were the United States, Saudi Arabia, Algeria, Nigeria and Norway, said Dinara Millington, Canadian Energy Research Institute vice-president of research.
In 2018, the majority of the refinery’s throughput was sourced from the U.S. and data from the Canada Energy Regulator show imports to Newfoundland from the U.S. averaged 88,100 bpd, or about 68 per cent of the refinery’s capacity.
Millington said the refinery is calibrated to refine light crude oil but noted that a proposed expansion project to add a coker could enable the new owners at Irving Oil to run a heavier slate in the future.
The most recent offshore oil discovery in Newfoundland is also a large heavy oil deposit, so the refinery could — at least theoretically — be recalibrated to accept heavy oil produced locally.
That heavy oil from Newfoundland “will need a home,” Millington said, though she noted a likely outcome would be to send the heavy crude to the U.S. Gulf Coast, where refineries are already designed to process heavy grades.