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New deal set for Atlantic refinery

Prospects looking brighter following Irving departure 

UnknownWorkers at North Atlantic Refining Ltd. site at Come By Chance, N.L. may see their luck change. The refinery had been set to sell to Irving Oil when the deal collapsed this October. Now U.S.-based Origin International, a Maryland company involved in oil recycling, has made a formal offer to purchase the assets of the company that include the refinery.
The deal, between Silverpeak, owner of North Atlantic Refining, and Origin International, was announced last week. Terms are still undefined as the two sides hammer out details. Expectations are that once the ink dries, Origin International will ramp refinery production back to full capacity with a full complement of workers.
As little as two weeks ago, Origin International CEO Nicholas Myerson asked that the facility be kept on ‘warm idle’ to make the transition to new ownership an easier task. “Origin is finalizing a plan that would have all employees back to work immediately after a transaction, with a restart for the plant in the second quarter of next year,” the company said at the time.
The North Atlantic Refining facility at Come By Chance employs 500 workers. The plant refines 135,000 bbl. per day of crude and contributes as much as 5% of the GDP of Newfoundland and Labrador.
OCTANE editor Kelly Gray can be reached a Kgray@ensembleiq.com

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Shell gets started on Scotford turnaround

UnknownLast March Shell announced it would hold off on its turnaround work at its Scotford refinery, a facility located about 50kms north of Edmonton. Canada was getting hammered by COVID-19 and Shell wanted to limit transmission of the disease. April was announced as the new date for the important maintenance work, but the health crisis had the company hold off again. Last week Shell Canada announced that its planned turnaround of the Scotford Refinery will commence this July.

 A turnaround is a scheduled event where an entire process unit of a refinery is taken out of service for an extended period for revamping. This periodic maintenance at Scotford happens about every five years and costs hundreds of millions of dollars. The Scotford turnaround announced last week will impact the site’s south upgrader. This system is one that adds hydrogen to bitumen to turn it into synthetic crude oil, which can then be further refined into fuel products.

The project is expected to take several months and will employ more than 3,800 workers per day. Given this large number of workers, Shell was concerned about the spread of COVID-19 at the location and idled the turnaround project until the company could be assured the health concerns of staff had been addressed. Already, Scotford had two confirmed cases of COVID-19 in June. Shell reports that the two cases were quickly isolated using protocols they had developed earlier.

Working with Alberta Health and other organizations Shell has sought to limit COVID-19 transmission by enforcing physical distancing, implementing screening protocols for workers coming to the site, changing the cafeteria to take-out only, requiring masks or face shields when on the property, and limiting the number of people on buses to create more opportunity for social distancing. The oil company also took a page from professional sports teams where they paired workers into cohorts who regularly work together to create workplace ‘bubbles’ of safety.

The Shell Scotford Refinery was build in 1984 and employs 1300 staff. The complex consists of a bitumen upgrader, oil refinery, chemicals plant and a carbon capture and storage (CCS) facility. Much of the 300,000 barrels per day produced at the upgrader is used by the adjacent refinery to create products such as gasoline, diesel, jet fuel, propane and butane. The refinery has a daily capacity of 100,000 barrels per day. The chemicals plant utilizes byproducts from the refinery to produce styrene monomer and ethylene glycol.

Octane editor Kelly Gray can be reached at kgray@ensembleiq.com


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N.L. warns of exodus of oil and gas industry without more federal help

Newfoundland and Labrador’s government is looking for a rapid answer from Ottawa on its request for aid for the offshore oil sector in light of a quickening exodus of exploration rigs from the province.

Premier Dwight Ball, Natural Resouces Minister Siobhan Coady and industry leaders held a news conference May 26 to repeat earlier warnings that hydrocarbon projects could be permanently lost to the province without a commitment from Ottawa.

Ball and Coady repeatedly warned that as each week passes, companies are closing and jobs are being lost.

The global COVID-19 pandemic and plummeting world oil prices have been causing problems for the East Coast industry.

In mid-March, Equinor and Husky Energy announced the decision to defer the Bay du Nord offshore development project due to falling oil prices and the economic downturn as countries respond to the novel coronavirus.

In addition, Hibernia has recently suspended its drilling program, the Terra Nova refit for May has been suspended and the West White Rose project has been deferred.

“Time may not be our friend,” the premier during the event.

imagesThe Newfoundland and Labrador Oil and Gas Industries Association, or NOIA, has said in order to remain competitive with Norway, the United Kingdom and Australia, the federal government needs to provide a renewed program of “incentives for offshore exploration.”

The province is backing many of the industry proposals, noting the offshore industry accounts for close to one third of the province’s GDP, 13% of wages and 10 per cent of all jobs.

Coady noted in an April 20 letter to federal Natural Resources Minister Seamus O’Regan that the province appreciated a $75 million allocation to help its industry reduce greenhouse gas emissions, but it needs further assistance.

Coady wrote that the province needs a program similar to Norway’s system of stimulating exploration through “direct tax payments.”

Her letter also called for a renewal of a regional tax credit program, and the introduction of 100% deductibility of capital costs to encourage companies to continue with their exploration plans.

Charlene Johnson, the chief executive of NOIA, said during Tuesday’s news conference that there are three drilling rigs in the province and the industry is hoping they will remain there, rather than being shifted to other jurisdictions.

“It’s a real toss-up because the minute Norway approves (incentives), it’s going to be very hard to entice them to stay in our waters,” she said.

“These decisions are being made now. We’ve had over a dozen companies end their membership in NOIA because they’re closing up shop here.”

O’Regan, who is also the MP for St. John’s South, said in a tweet that he’d been in discussion with Johnson regarding the growing anxiety in the offshore sector.

“We all have friends and family who are worried about their jobs. Oil and gas is in a state of upheaval out West, and around the world. But I am a champion of our offshore. Together we will get through this.”

Ottawa has been offering programs to help companies with liquidity problems during the pandemic.

Federal agencies last month announced commercial loans, ranging in size from $15 million to $60 million each, to fund cash flow needs for a year for companies that had shown themselves to be financially viable prior to the pandemic.

A spokesman for O’Regan’s office said these kinds of programs have helped provide liquidity to the small and medium-sized players in the industry.

In addition, the Canada Emergency Wage Subsidy program covers up to 75% of an employee’s wages for an employer, and can be applied to oil and gas firms, O’Regan office noted.

 


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‘What do we do now?’ Labour dispute at Regina refinery nears 6 months

Screen Shot 2019-12-10 at 11.08.12 AMFor Dean Funke, getting hired at Regina’s Co-op oil refinery felt like winning the lottery.

“For a blue-collar worker, you can’t get better than the refinery. And it’s always been that way,” he told The Canadian Press.

Born and raised in Saskatchewan’s capital, Funke had worked in Alberta’s oilpatch but the refinery job allowed him to stay home and put down roots.

Nearly a decade later, the process-operator-turned-picket-captain wonders what he might do next as a dragging labour dispute between the refinery and his union nears the six-month mark.

“They’re hard conversations. What do we do now? Go get another skill, I guess, is my option, so go back to school?” he said.

“Maybe this isn’t where we’re going to finish our careers. Hopefully it is, but you never know.”

About 700 unionized workers were locked out by refinery owner, Federated Co-operatives Ltd., on Dec. 5 after they took a strike vote.

One of the most contentious issues were proposed changes to employee pensions because of costs to the company.

“Negotiators from FCL have indicated they are prepared for prolonged job action,” reads a briefing note prepared for Saskatchewan’s deputy minister of labour relations earlier this year. It was released to The Canadian Press under freedom-of-information legislation.

Over the winter, Unifor members blocked access to the refinery, which led to fines, court hearings and police arrests. Mischief charges were laid against 14 people, including the union’s national president, Jerry Dias.

“Co-op won’t return to the table unless Unifor removes the barricades, i.e stops breaking the law. Unifor won’t remove the barricades unless the Co-op removes all replacement workers. I think they call that a Mexican standoff,” a labour relations official wrote in an email at the time.

Premier Scott Moe appointed veteran labour mediator Vince Ready, who made recommendations that were accepted by workers, but not the company.

In turn, the refinery owner put forward its final offer, which members rejected.

About 200 replacement workers and 350 managers are keeping the plant running, said the company.

“This is labour relations at its most brutal,” said Scott Walsworth, a business professor at the University of Saskatchewan.

“This is kind of the threat that holds labour relations together _ that you’d better work things out and keep a good relationship with the other side or else you’ll end up like the refinery.”

Walsworth, who’s also an arbitrator, believes the COVID-19 pandemic and economic shutdown has swung the pendulum of public support towards the company.

“It’s hard to manufacture sympathy in this kind of a climate, when so many people are out of work.”

The refinery has cut oil production because of low prices and a drop in demand. Walsworth said it makes it a convenient time not to be paying employees.

The crisis has also created expectations for employers to be sympathetic and not to put profits before people, he added.

“I don’t think Co-op wants to get on the wrong side of that momentum.”

In a statement, Co-op spokesman Brad DeLorey said the company hopes Unifor reconsiders the final offer, which he said exceeds compensation at other Canadian refineries.

Co-op has criticized Unifor for trying to disrupt the fuel supply of farmers busy with spring seeding by picketing cardlocks.

Unifor Local 594 president Kevin Bittman said the pandemic makes it tough for the union to get its message out when members can’t meet in person or rally in large groups.

He also said the company’s demands have been met and there’s nothing left to bargain.

The Opposition NDP has joined the union in calling on the Saskatchewan Party government to intervene and legislate binding arbitration. Premier Scott Moe, calling the dispute a fight between a private company and a union, has rejected the idea.

Walsworth said under provincial labour laws, the government can’t force a private employer into binding arbitration unless the case can be made that society is in danger.

If the refinery owner says its equipment and those living around the plant are safe – and without evidence to prove otherwise – “it’s a pretty tough case to make that the government should step in.”

Without both sides consenting to binding arbitration or the appointment of another mediator, which the government isn’t considering, the waiting continues.

“How do you break this stalemate?” asked Walsworth.


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Irving buys Come By Chance refinery

Move enhances company’s market edge

UnknownIrving Oil has announced the completion of its acquisition of North Atlantic Refining Corp. from U.S.-based investment firm Silverpeak. The deal, with undisclosed financial terms, includes a 135,000-barrels-per-day (bpd) refinery located at Come By Chance, NL, as well as a network of retail sites and other marketing assets.

Unknown-1The retail locations include nearly 100 company-owned and dealer sites and cardlocks, including the Orangestore chain of 24 convenience stores. North Atlantic Refining Corp has been a well-known major player in the province’s stove oil, gasoline, and propane trade since 1950.

The Newfoundland refinery is one that comes with a storied past of bankruptcies and business losses. Bought and sold a number of times since it went into service in the early 1970s, the facility was built to refine light crude and takes about 70% of its inputs from sources in the U.S. Silverpeak had recently invested $400 million to bring capacity up from about 100,000 bpd to 135,000bpd. Proposed is a further upgrade that would increase output to more than 165,000bbd and add a new coker that would allow a heavier grade of crude to be refined.

This initiative that is now in Irving’s court would bode well for the company given that they just arranged to ‘import’ Albertan heavy bitumen via tankers through the Panama Canal route. As well, Newfoundland and Labrador offshore wells also produce heavier crude and with an upgrade, the Come By Chance facility could finally refine the locally sourced heavy oil.

The Come By Chance refinery and the North Atlantic Refining Corp. convenience retail and fuel network in Newfoundland and Labrador is a strategic fit for Irving. With the closing of the Silverpoint deal, Irving will now operate the only two refineries in the Atlantic region. The other is Canada’s largest refinery at 320,000bbd and is located at St. John, NB. These facilities are married to another refinery in Cork, Ireland (71,000bbd). Together this recent agreement gives Irving a solid footing in fuel refining in the North Atlantic basin as well as an uptick in retail locations that create a greater market presence for this Halifax-based family business.

Kgray@ensembleiq.com


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Parkland nears completion of Burnaby refinery turnaround

Parkland Fuel Corporation is nearing completion of the required work for the 2020 Burnaby refinery turnaround and has begun the startup sequence for the facility.

In statement, the company explained: “We expect an approximate two-week process to reach full operational capability when accounting for additional coronavirus preventative safety measures. COVID-19 has required Parkland to change processes and procedures in response to guidance from Provincial health authorities. This has led to a decrease in the number of staff on site and lower productivity.

“I would like to thank the Parkland team and contractors for all their hard work during this maintenance event,” said Ryan Krogmeier, SVP, supply, trading, refining and HSE. “We are proud of the outstanding safety results to date and the effort exhibited by everyone involved.”


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Husky Energy reports $2.3B Q4 loss on writedowns

UnknownShares in Husky Energy Inc. fell by as much as 11.7% in Toronto last week after it reported fourth-quarter results that matched analyst expectations on production but missed by a wide margin on funds from operations.

The Calgary-based company blamed lower U.S.refinery margins, an extended shutdown at its refinery in Lima, Ohio, and $74 million related to employee severance for posting funds from operations of $469 million, compared to $583 million in the year-earlier period and analyst expectations of $712 million, according to the financial markets data firm Refinitiv.

The company posted a net loss of $2.34 billion in the last three months of 2019 as it took asset impairment and other charges related to its long-term price assumptions and reductions in its long-term capital spending plans.

The loss amounted to $2.34 per share for the quarter ended Dec. 31 compared with a profit of $216 million or 21 cents per share in the same quarter a year earlier.

Revenue, net of royalties, totalled $4.79 billion compared with $4.99 billion in the fourth quarter of 2018.

Husky says non-cash asset impairments and other charges totalled $2.3 billion after tax in its most recent quarter primarily related to its upstream assets in North America, including its Sunrise project.

Other charges also included exploration-related write downs and asset de-recognition at its Lima Refinery following the completion of a crude oil flexibility project.

The writedowns echo a $3.3-billion charge taken by oilsands rival Suncor Energy Inc. earlier this month, with $2.8 billion of that related to lower forecast prices for heavy oil from its Fort Hills oilsands mine in northern Alberta. Partner Teck Resources Ltd. took a charge of $910 million for the same reason for its 21.3 per cent stake in the Fort Hills mine.

 


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Husky Energy CEO blames regulatory process for end of Frontier oilsands mine

The shelving of the proposed $20.6-billion Frontier oilsands mine this week stems mostly from the length of time it took for it to win regulatory approval, says the CEO of oilsands producer Husky Energy Inc.

The project application was withdrawn by Teck Resources Ltd. last Sunday, just days before the federal government was to rule on whether it would allow it to proceed.

Teck CEO Don Lindsay said there was “no constructive path forward” in a Canadian environment marked by conflict amid Indigenous rights, climate change issues and resource development.

“What killed Teck, you know, ultimately, was a regulatory process that just went on and on and on and on,” said Husky CEO Rob Peabody on a conference call Thursday to discuss his company’s fourth-quarter results.

“Had that process concluded in a sensible timeframe, I’m sure we’d have a Teck project under construction today because there were proponents who were set and keen to move forward with that project.

“If you wait long enough, that sort of coalescence on the idea of spending that sort of money ultimately unravels.”

The Frontier project application was first submitted to the Alberta Energy Regulator in late 2011. In 2016, a joint federal-provincial review panel was appointed and it approved the project last July.

Asked if the outcome suggests large oilsands projects can’t be built in Canada, Peabody said it actually means all large projects will have a difficult time, even if they produce renewable hydroelectric energy.

“Building major highways, building pipelines, building major infrastructure projects around cities, things like that, I think this applies to everything,” he said.

Critics of the mine, designed to produce 260,000 barrels of oil a day, said it wouldn’t have been profitable unless North American oil prices were much higher than they are now, although Teck said new technologies would have been employed to bring down costs.

Husky said lower long-term commodity price forecasts were the major reason it decided to take non-cash impairment charges of $2.3 billion after tax in the quarter ended Dec. 31.

The charges are related to its upstream assets in North America, including its Sunrise oilsands project and natural gas assets, as well as the subtraction of redundant assets at its refinery in Lima, Ohio, following a project that allows it to process heavier barrels of crude.

The writedowns echo a $2.8 billion charge taken by oilsands rival Suncor Energy Inc. earlier this month related to lower forecast prices for heavy oil from its Fort Hills oilsands mine in northern Alberta.

Teck took a charge of $910 million for the same reason related to its 21.3% stake in the Fort Hills mine.

Husky cut about 370 jobs in a round of layoffs in October to better align staffing with capital spending plans for 2020 and 2021 that had been reduced by $500 million due to changing market conditions.

Shares of Husky fell by as much as 11.7% to $6.31 on Thursday morning in Toronto after it reported results that matched analyst expectations on production but missed by a wide margin on funds from operations.

The Calgary-based company controlled by Hong Kong billionaire Li Ka-shing blamed lower U.S. refinery margins, an extended shutdown at the refinery in Lima, the temporary shutdown of the Keystone pipeline in November and $74 million related to employee severance for posting funds from operations of $469 million.

That compared with $583 million in the year-earlier period and analyst expectations of $712 million, according to the financial markets data firm Refinitiv.

The company posted a net loss of $2.34 billion, compared with a profit of $216 million in the same quarter a year earlier.

On the call, Peabody said the company’s Asia-Pacific operations are getting back to normal after precautions related to the COVID-19 virus temporarily reduced demand for natural gas from the Liwan offshore project operated by its partner, China’s CNOOC Ltd.


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Government appoints special mediator in Regina oil refinery labour dispute

Screen Shot 2019-12-10 at 11.08.12 AMThe Saskatchewan government has appointed a special mediator in a contract dispute that has dragged on for more than two months at a Regina oil refinery.

Labour Minister Don Morgan said veteran arbitrator Vince Ready will try to help refinery owner Federated Co-operatives Ltd. and the union for about 700 workers to reach an agreement.

He said it is in the interest of both parties to negotiate a contract at the bargaining table.

“We are appointing a special mediator to help resolve the impasse because of the impact of the dispute on Saskatchewan families, communities and businesses,” he said in a news release.

Also on Feb. 12, a judge found Unifor guilty for the second time of violating a court injunction that said members could not prevent traffic from moving in and out of the plant. Justice Neil Robertson fined the union $250,000 on top of a $100,000 penalty last month.

Ready, who has worked in labour relations for more than five decades, was to begin his work Feb. 18.

Premier Scott Moe said he hopes Ready’s appointment will be the “first significant step toward an agreement.”

“It is my true hope that we’re able to move forward – and move forward swiftly – in finding a resolution to this situation that is best for all involved and best for all in the province,” Moe said.

Federated Co-operatives said it looks forward to getting a deal done.

“Since the premier’s first offer of a special mediator, we have welcomed this appointment and the opportunity to have productive bargaining,” the company said in a statement.

“We look forward to meaningful discussions with Mr. Ready that lead to a long-term, sustainable agreement that works for both parties.”

The news was also met positively by Unifor.

“I applaud the government’s decision for appointing the mediator and we hope he can help us in getting a settlement,” said Local 594 president Kevin Bittman.

Negotiations have gone nowhere because of the company’s stubbornness at the bargaining table, he said.

“The Co-op is seeking to gut our jobs and our pensions during a time of record profits,” Bittman said.

“We have asked for the standard industry pay increases and to leave the pensions that FCL promised they would not touch three years ago.”

Federated Co-operatives locked out workers Dec. 5 when the union issued strike notice. Pensions are the main sticking point in the contract fight.

The company has said Unifor’s barricades at the Co-op refinery site were leading to gasoline shortages in some communities because trucks hauling fuel weren’t able to get in or out of the plant.

Ready is to recommend terms for an agreement if the two sides can’t reach a deal with his help within 20 days.

Ready was involved in trying to find a solution in a prolonged forestry strike on Vancouver Island going back to July. A tentative deal was reached this week.

He was part of negotiations in the 2014 teachers strike in British Columbia and published a binding report resolving a stalemate between B.C. Ferries and its employees union in 2007.

He also resolved a violent dispute at the Giant gold mine in Yellowknife in 1992. That strike resulted in the deaths of nine workers in a mine explosion. Miner Roger Warren was convicted of setting up the blast.


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Red River Co-op pumps go dry

Out of gas (1)Federated Co-operatives’ Regina refinery labour dispute is making itself felt well beyond Saskatchewan. Late last week members of Unifor, the union behind the more than 700 workers currently locked out of the Regina refining centre, staged a picket at Winnipeg’s Esso and Shell terminals where local Red River Co-op drivers pick up fuel to restock the group’s 35 gas bar and card lock sites in Manitoba and Northwestern Ontario. Red River Co-op is a business independent of FCL that is owned by its more than 180,000 members and it looks to Federated for wholesale  products.

The picket was successful and by Friday Feb. 7, locations were reporting no gas and limited diesel stocks in at some of the 23 locations in the Winnipeg area. The move by Unifor is a pressure tactic designed to get Federated Cooperatives Ltd. (FCL) back to the bargaining table. At issue is the company’s plan to change how pensions are funded.

The dispute is also causing considerable collateral damage to low wage workers and transport operations. For example, the labour action in Winnipeg has caused locations to send workers such as gas bar attendants home after fuel dispensers were closed.

In Alberta, Saskatchewan and Manitoba, FCL  has had to impose limits on its cardlock customers. On February 5, Federated asked transport companies to limit their fills to 100 litres of gasoline and 300 litres of diesel at sites in the three provinces. With most transport drivers using between 600 litres and 800 litres per day for deliveries, the fuel limit is a major inconvenience that is negatively impacting trucking businesses.

By Monday Feb. 10, Red River’s gas bar sites reported deliveries were beginning to reappear in the Manitoba capital as the picket wound down at the eastern Winnipeg fuel terminal.

Unifor reports that disruptions will continue as it ramps pressure on FCL operations and customers. Currently, Unifor is calling for a boycott of all Co-op retailers and businesses. The strike and lockout are now in their second month.

Contact OCTANE editor Kelly Gray at kgray@ensembleiq.com