Come By Chance would be tough sell: consultant

Talk of a potential sale of the Come By Chance oil refinery stepped up this week, with the Wall Street Journal reporting the Korea National Oil Corp. (KNOC) has hired Deutsche Bank to handle the sale.

The report cited “people familiar with the matter,” though the assertion has not been confirmed by The Telegram.

Rumours of a sale started the first week of September, with reports out of Seoul stating a KNOC representative said the company was considering unloading Canadian assets. Those assets would include the refinery at Come By Chance, operated by the KNOC subsidiary Harvest Energy Trust.

At that time, Harvest spokeswoman Kari Sawatzky could shed no light on the likelihood of a sale of Come By Chance.

Operating loss

The company’s refining operation lost $106.6 million in the first half of 2013 and recorded a $92-million operating loss for the same period in 2012.

“It’s a tough market and it doesn’t surprise me that refinery’s been struggling with its profitability,” said Michael Ervin, principal at MJ Ervin and Associates, a division of the Kent Group.

If a sale is indeed in the works, Ervin believes it will be a tough sell.

“I don’t think the prospects are very good,” he said Thursday, pointing to an existing surplus of refining capacity relative to demand.

As well, “Atlantic Basin refineries in North America are a little more challenged in terms of gaining access to what’s currently lowerpriced feedstocks coming from the Canadian and American mid-west,” he said.

Being island-isolated, the refinery in Newfoundland and Labrador is stuck sailing in feedstock, unable to tap rail for supply.

“The difference now today compared to, let’s say a decade ago, with respect to feedstock costs is that 10 years ago continental feedstock costs were on a par with waterbourne feedstocks, crude oil feedstocks. That’s not the case today,” Ervin said.

Construction of the Come By Chance refinery was started in 1971 and finished in 1973, under Shaheen Resources. That company went bankrupt in 1976.

In 1986, Newfoundland Processing Ltd. restarted the operation, controlling it until a sale in 1994 to the Vitol Refining Group.

The operation became North Atlantic Refining Limited and was run by Vitol until 2006, when the refinery was sold once again — this time to Harvest Energy.

Harvest’s operation was bought up by KNOC in 2009.