05 October 2006

Chances of second refinery in NL more remote

Chances of a second refinery being built in Newfoundland and Labrador dropped again Wednesday with news that oil prices continued a downward turned and Irving is planning to double its refining capacity at Saint John with the construction of a new facility there.

Plans for refinery are expected to be unveiled Thursday in a presentation to the Saint John Board of Trade.

The second Saint John refinery will reportedly have the capacity to refine 300, 000 barrels per day. It will join the existing Irving refinery in the city that processes about 250,000 barrels per day. Irving is reportedly planning to upgrade at a cost of $1.0 billion.

The new refinery project is in addition to another Irving venture to build a $750 million liquid natural gas terminal in the New Brunswick port city. Having a reliable supply of natural gas is reportedly crucial to the development of the second refinery.

Word of the second refinery for Saint John made business news across the country.

Meanwhile in Newfoundland and Labrador, little is being said today of Danny Williams wordmark announcement yesterday. The exception is in the land o'bloggers and on the province's radio call-in shows where callers organized by the Premier's Office continue to battle ordinary citizens who complain about the $1.1 million plus price tag for the project thus far.

There was no mention of Williams' initiative - reputedly able to solve the province's economic woes - in any of the country's major newspapers.

On the business front in Newfoundland and Labrador, plans for a natural gas processing facility located in Placentia Bay remain little more than a rumour. Any development of natural gas offshore Newfoundland and Labrador remains contingent in part on technical developments and, especially on the province's natural gas royalty regime. The royalty structure is expected to be released by the provincial government in December after nearly a decade of study.

A consortium studying a second oil refinery near the site of the existing Come-by-Chance facility is proceeding to a detailed design and costing phase of its evaluation. A decision on whether or not to proceed with construction is expected before the end of 2006.

That decision will hinge on several factors but undoubtedly one will be competition from new construction or upgrades to existing facilities that are already feeding the lucrative New England market. Saint John is the closest Canadian refinery to New England. Refined product can be shipped to the United States by tanker from the Port of Saint John or by land.

Harvest Energy, new owners of the Come-by-Chance facility, have already signaled their intention to increase the refinery's capacity.

In other Newfoundland and Labrador energy news, the $10 billion dollar Hebron project remains dead despite efforts by Danny Williams and his senior officials to lure the companies back to the negotiating table. Talks aimed at developing the 500 million barrel field ended acrimoniously in April with Premier Danny Williams threatening to find a legal way to force the oil companies to develop the project on his terms.

Newfoundland and Labrador finance minister Loyola Sullivan also commented Wednesday on Fraser Institute report that indicated Newfoundland and Labrador may spend upwards of half its annual budget on health care by 2030 if current trends continue. Sullivan said health costs are rising at an uncontrollable rate and that something would need to be done. Sullivan offered no indication of what the provincial will do or why it has allowed health care spending to grow uncontrollable.

Under the Constitution, health care is entirely the responsibility of the provincial government, although some provinces. Since taking office in 2003, Premier Danny Williams has continued to demand increased transfer payments from Ottawa to provide core provincial responsibilities. This is despite the government's growing oil revenues and despite Williams having rejected a Hebron development deal that would have delivered to provincial coffers royalties and other revenues greater than the provincial accrual debt. Further development of other fields near Hebron would have greatly increased provincial revenues over the life of the project.