Irving Giveth and Irving Taketh Away....New Oil Refinery for Saint John Shelved

Rising fuel-efficiency standards, changing consumer habits and growing use of ethanol in the United States played a big role in the cancellation of an $8-billion proposed refinery in New Brunswick.


Irving teamed up 18 months ago to study the feasibility of building a second 300,000 b/d refinery in Saint John to boost gasoline supplies in the U. S. Northeast. Construction was slated to start in 2011 or 2012.But they scrapped those plans yesterday after spending nearly $80-million on technical and commercial feasibility studies. Kevin Scott, director of refining growth for Irving, said gasoline demand has declined in the past two years, after growing steadily by 1% to 2% for years, and those declines appear permanent.


The move marks the third cancellation or delay of refining projects in Atlantic Canada in the past year. Harvest Energy Trust has deferred a $2-billion expansion of its Come-by-Chance plant in Newfoundland, and plans by Newfoundland and Labrador Refining Corp. for a new facility were stalled by the credit crunch. The refinery project was already on a slow track. Late last year, Irving changed the project's timing to a maximum eight years from three or four. At the time, the company said it was concerned about labour shortages, financing costs and the economic slump. The new refinery would have sourced oil from Canada's East Coast offshore projects, the North Sea, West Africa and South America.


The cancellation means the company will not need, for now, to try to repatriate thousands of tradesmen that moved to Alberta from Atlantic Canada in recent years to work in the oil sands.


The cancellation deals a major blow to New Brunswick's vision of a building a major energy hub in the Saint John area to serve Eastern Canada and the U.S. Northeast. The new initiatives would have been anchored by the expanded Irving refinery capacity, which would have doubled in size. The refinery expansion would have contributed about $7-billion of the $15-billion to $20-billion in new capital investment touted for the region.


The hub idea, heavily endorsed by Irving Oil and the provincial government, is to use Saint John's location and deep harbours to become a key delivery and transmission point for the U.S. Northeast.


Much was riding on these proposals because of Saint John's recent history of economic decline, given the loss of a sugar refinery, of ship-building operations, and the difficulties facing the provincial forestry industry. At its peak, the project was expected to create several thousand construction jobs.


Scores of energy projects were cancelled or put on hold in the oil sands last fall, but some are being re-considered with the economy recovering and oil prices rebounding. While the recession played a role in depressing gasoline demand, the proposed refinery is one of the first in North America to be scrapped because of expectations of lower consumption over the longer term.


Til later