Ultramar refinery near Quebec City should withstand industry troubles

The Canadian Press ~ The News
Send to a friend

Send this article to a friend.

CALGARY - Ultramar Ltd.'s refinery near Quebec City should avoid the same fate as another plant run by its U.S. parent, a petroleum consultant said Monday.
Texas-based Valero Corp. (NYSE:VLO) announced last week it would permanently close its 210,000-barrel-a-day refinery in Delaware City, Del.
But its Montreal-based subsidiary, Ultramar, shouldn't have any need to shutter its refinery in Levis, Que., which has a capacity of 265,000 barrels per day.
"I believe that their Quebec refinery is quite safe," said Roger McKnight, a senior petroleum adviser for Oshawa, Ont.,-based consultancy En-Pro International.
Its prospects are even better if Royal Dutch Shell PLC ends up closing down its refinery in Montreal, which would give Ultramar "a bigger market share, bigger bang for their buck," he added.
In addition to the Quebec refinery, Ultramar also has 830 gasoline stations in Ontario, Quebec and the Atlantic provinces. It employs about 3,700 people.
Valero's Delaware facility is the largest U.S. refinery to close this year.
A company spokesman said Friday the U.S. plant was hemorrhaging US$1 million each day this year, as its margins were squeezed by higher crude prices and lower fuel demand because of the recession.
Attempts to sell the refinery were unsuccessful.
This summer, Shell launched a strategic review into the future of its Montreal East refinery, which has been a fixture in the area for 76 years and injects more than C$200 million each year into Montreal's economy.
Among other options, the Anglo-Dutch energy giant is looking at closing or selling the 130,000-barrel-a-day refinery.
"You've got to sort of ask a question about the Shell refinery in Montreal. I don't think they're going to find a buyer for it," McKnight said.
One potential buyer, Swiss-based refiner Petroplus Holdings AG, has been putting some of its own operations on hold, diminishing the chances it will make a play for the Montreal refinery.
Valero was one of the first U.S. refiners to revamp its equipment to handle lower quality grades of crude, like the impure bitumen that comes from Alberta's oilsands.
It made economic sense to do so, because heavy, sour crude was so much cheaper to buy than light, sweet varieties, like benchmark West Texas Intermediate crude.
However, with so many of Valero's counterparts following suit, heavy crude is in much higher demand, causing its price to catch up to light crude.
The narrowing of the so-called light-heavy differential has been a boon to major Canadian heavy oil producers like Suncor Energy Inc. (TSX:SU) and Canadian Natural Resources Ltd. (TSX:CNQ).
However, that same phenomenon has been a blow to companies that are heavily dependent on the refining side of the petroleum industry like Valero, Regina-based Federated Co-op and New Brunswick-based Irving Oil Ltd.
Before the announcement Friday, Valero had already idled two units at its Delaware facility, putting 150 people out of work. It said last month it would cut 100 jobs at its Paulsboro, N.J. refinery by the end of the year.
In June Valero shut its refinery in Aruba, which had a capacity of about 275,000 barrels a day.
El Paso, Tex.-based Western Refining Inc. announced earlier this month that it would close its Bloomfield, N.M., facility, putting 100 people out of work.
And Sunoco Inc. said it would indefinitely idle its Eagle Point facility in New Jersey.
"I can see 15 per cent of the refining capacity in the U.S. just dropping off the face of the earth very, very soon," McKnight said.
"It's a no brainer. There's no point in keeping open unless you can justify the costs of your inputs."

Organizations: Ultramar Ltd., NYSE, Pro International Royal Dutch Shell PLC TSX Petroplus Holdings Suncor Energy Inc. Canadian Natural Resources Ltd. Federated Co-op Irving Oil Western Refining Inc. Sunoco Inc.

Geographic location: Quebec City, U.S., Montreal East CALGARY Delaware City Levis Oshawa Ontario Alberta West Texas Intermediate Paulsboro, N.J. Aruba Bloomfield, N.M. Eagle Point New Jersey

  • 1
  • 2
  • 3
  • 4
  • 5

Thanks for voting!

Top of page

Comments

Comments