Foreign competition hurts refineries
Alberta MP says higher prices for oilsands crude would offset closures
The viability of a B.C. oil refinery that has operated since the 1930s is at risk due to intense competition from so-called super refineries in Asia, a New Democratic Party MP has warned.
But refinery closures will be offset by higher tax and royalty revenues if Alberta is no longer getting “screwed” on the price it gets for oilsands crude, says Burnaby-douglas MP Kennedy Stewart.
Chevron Corp.’s refinery in Burnaby, the only such refinery left in the Lower Mainland and one of only two in B.C., may be unable to compete with bidders from China and India for diluted bitumen being shipped from the Alberta oilsands via Kinder Morgan’s pipeline to the West Coast, Stewart said.
The Burnaby refinery, which opened in 1935 and employs 250 people, is capable of processing 55,000 barrels of crude oil a day into gasoline, diesel, jet fuel and asphalt.
Stewart has instigated a series of hearings by the House of Commons Natural Resources committee into the state of Canada’s refinery sector.
MPS were told Tuesday by government and industry officials that, despite surging production from Canada’s oilsands, refineries are operating below capacity and are struggling to compete against “super” refineries in India and China.
“Chevron is being outbid for the oil, because there are more bidders coming into the process,” Stewart said in an interview, citing conversations with the company and with
“It gets to the point where, if you don’t have enough crude oil, you can’t run the refinery properly. It could eventually render the plant inoperable.
Russ Day, secretary-treasurer, local 601, Communications, Energy and Paperworkers Union of Canada, representing 140 workers at Chevron refinery in Burnaby, B.C.
the Communications, Energy and Paperworkers Union of Canada.
He said the company is, ironically, facing tougher times if Kinder Morgan succeeds in getting National Energy Board approval to more than double its pipeline capacity from Alberta to Burnaby from 300,000 barrels a day to 700,000 a day.
“If it goes up to 700,000 barrels … that whole 700,000 will be open for international bidding and they’ll be outbid. They won’t be able to get any stock,” Stewart said.
“So, ironically, expanding the pipeline kills the local refinery.”
A spokesman for the Communications, Energy and Paperworkers Union of Canada, which represents about 140 workers at the Burnaby refinery, said the union has been told to expect reduced operations in March.
Russ Day said the company recently lost out in its bid for 20,000 barrels a day of crude from the Kinder Morgan pipeline, a major setback for an operation with a maximum capacity of 55,000 barrels a day.
“It gets to the point where, if you don’t have enough crude oil, you can’t run the refinery properly,” said Day, secretary-treasurer of CEP local 601.
“It could eventually render the plant inoperable.”
Ray Lord, a Chevron spokesman at the refinery, said the company has had discussions with the NDP MP and hosted a tour of the facility.
Lord, who said the Chevron refinery supplies about a third of transportation fuel in the Lower Mainland, wouldn’t discuss negotiations with Kinder Morgan or any specific challenges relating to competition with foreign buyers of Canadian crude.
But he said the company is monitoring “very, very closely” the costs associated with acquiring crude to feed the refinery.
He couldn’t provide a clear assurance about the Burnaby facility’s long-term viability.
“This refinery has been a very key piece of the fuel picture here for many, many years and it’s one we would like to continue doing,” he said.
“I don’t have a crystal ball, but our intention is certainly to explore all the options we can to maintain a viable ongoing business here.”
Alberta Conservative MP Leon Benoit, chairman of the Tory-dominated natural resources committee, acknowledged that the move to open up Asian markets to Alberta oilsands crude could cause problems for Canadian refineries.
The main argument in favour of proposals like the Kinder Morgan expansion and Enbridge Inc.’s proposed Northern Gateway pipeline to Kitimat, B.C., is to ensure that the price for Alberta’s bitumen isn’t discounted because the market is confined only to American buyers.
“When you are looking at the good of the country, … why shouldn’t Albertans start to get for their crude a market price that really reflects what oil is worth in the world?” Benoit, MP for Vegreville-wainwright, said in an interview.
“We’ve been getting screwed (because) of no competition to the American market.”
He said he hopes refineries don’t close, but “if it means that happens and we can get an extra $20 a barrel for our oil, then the taxes on that will pay for a lot of health care and a lot of education and a lot of the other things we all like.”
But the CEP’S Russ Day said if the Chevron plant closes or turns into a storage facility for crude oil, like two other former Lower Mainland refineries, Canada is effectively exporting processing jobs abroad.
“Simply exporting it wholesale and importing refined product back into the country doesn’t make sense.”