Can pipelines in Eastern Canada boost refineries? – by Yadullah Hussain (National Post – April 19, 2013)

The National Post is Canada’s second largest national paper.

Tired of poor refining margins, Imperial Oil Ltd. has been soliciting buyers for its Dartmouth refinery in Nova Scotia since last May, and the announcement of new eastern pipelines has not led to a change of heart at the company — at least for now.

The company has been saying that it has received multiple offers since last October and now expects to make a decision later this year.

“We are still looking at a variety of options that could include selling the refinery or potential conversion to a distribution terminal operation,” said Pius Rolheiser, Imperial Oil spokesman.

Imperial’s stance underscores that while TransCanada Corp.’s Energy East pipeline and Enbridge’s Line 9 reversal are welcome relief valves for the Canadian energy industry, they may do little to boost the prospects of some refineries in Central and Eastern Canada.

“I would not say it is a panacea,” said Bill Simpkins, an Atlantic Canada representative of the Canadian Fuel Association, an industry body of the country’s refiners including Shell Canada, Suncor Energy Inc. and Imperial.

Eastern Canadian refineries can process synthetic crude oil from Alberta and even some heavy crudes, but only Imperial’s 121,000-barrels-per-day Sarnia, Ont. refinery has a plugged-in coking facility that can process raw bitumen, Mr. Simpkins said.

“No bitumen gets processed outside of Alberta, except if it’s going to the United States. If bitumen ever goes down the TransCanada [eastern] pipeline it will have to be exported somewhere, unless refiners are planning to build a $2-billion coker.”

Irving Oil’s port in Saint John, N.B. offers an export outlet for the bitumen, and the New Brunswick government is pushing to become Canada’s eastern oil hub, but that may take a while.

“It is going to be an evolving market over a 40-year life of the project, and it may start with connections to the eastern and Maritime refineries,” Carl Kirst, analyst at BMO, said. “Ultimately there may be an export line to other countries.”

Suncor’s decision to abandon its $11.6-billion upgrading joint venture in Alberta with France’s Total also puts further pressure on bitumen production and makes the cases for Keystone XL, which would connect to bitumen-processing refineries in the Gulf Coast, and the export-focused Northern Gateway project even more compelling.

Still, the eastern pipelines are a way out for synthetic and other Canadian blends, and have been cheered by refiners seeking alternatives to Brent-priced crude.

TransCanada has asked shippers to confirm interest in its proposal to convert two natural gas pipelines from its east-west Mainline system into oil lines. Once assured of interest, the company will seek a permit from the National Energy Board by the fourth quarter of the year with expected completion date of 2017.

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