Oil firm eyes East Coast route9/24/2012
A Calgary oil company is hoping to route oil through an East Coast port to a refinery in Newfoundland.
Harvest Operations Corp. is exploring the option of using rail to bring Alberta oil east, then shipping it by barge to Come By Chance. Its subsidiary, North Atlantic Refining Ltd., has a refinery there that has a current crude capacity of 115,000 barrels a day.
“We’re looking at various options,” Rob Pearce, chief operating officer at Harvest, said Friday when asked what port the company might use.
He wouldn’t say if Halifax is among them.
“I can’t comment on that right now,” Pearce said. “We’re looking at what is a combination of rail and port capability that would be able to deliver the crude to Come By Chance or elsewhere.”
There are a number of companies looking at the idea of using rail to move Alberta oil east, and then putting it on ships bound for Europe, Pearce said.
“Anyone with Western Canadian crude oil production, or even U.S. crude oil production, is looking at various ways of getting that crude to market, including some combination of rail and ship,” he said.
The big question is where do rail and shipping costs erase the profits on cheaper western oil.
“The $64,000 question right now for everyone is for how long will various Canadian and U.S. crudes be discounted to international crudes,” Pearce said. “And as long as that discount is deep enough, some combination of rail to the coast makes sense where those Canadian crudes, domestic crudes, can achieve international pricing.”
The price differential between Western Canadian Select and Brent — the benchmark price for oil that comes from places like Algeria, Kazakhstan and Norway — is about $35 a barrel, said Roger McKnight, senior petroleum adviser for En-Pro International of Oshawa, Ont.
“There’s all sorts of things being kicked around about (moving it east by rail); the problem is in transportation costs,” McKnight said. “Because that bubble could burst really quickly.”
Irving Oil is already importing light, sweet Bakken crude from North Dakota by railcar to its refinery in Saint John, N.B., to take advantage of the price differential. The company is constructing a rail terminal there that’s reportedly going to be capable of handling 69,000 barrels daily of Bakken crude.
“We’re forecasting significant growth in oilsands production, and we’re concerned about being market-constrained because we fill up our traditional markets pretty quick,” said Mark Pinney, manager of markets and transportation at the Canadian Association of Petroleum Producers.
With delays to both the Keystone XL pipeline, which would have connected the oilsands to the Gulf of Mexico, and the Northern Gateway pipeline, which would carry oil and gas from Alberta to the British Columbia coast for shipment to Asia, Canadian companies are looking at all options, Pinney said.
“I would say included is access to the East Coast for Western Canadian crude, whether it be by pipe or rail.”
It would likely be faster to get a rail project in place than a pipeline, Pinney said.
“But I think people are generally looking at both because once you get to the East Coast, you get access to tidewater. And it’s not just European markets they would be looking to serve. For example, you could serve the Indian market off of the East Coast.”
(The Chronicle Herald)