August 13, 2008 at 7:08 pm #3480
Harvest mulls C$2 bln Newfoundland refinery project
By Jeffrey Jones Tue Aug 12, 2008 11:25 AM ET
TORONTO (Reuters) – Harvest Energy Trust is considering a C$2 billion ($1.9 billion) expansion of its Newfoundland oil refinery, a project that would boost output by 65 percent, the company said late on Monday.
Calgary-based Harvest said SNC-Lavalin, the engineering firm it had hired to study expansion alternatives for the Come-By-Chance plant, had recommended an increase of production capacity to 190,000 barrels a day from 115,000.
The project would include building a delayed coking unit, retooling its existing gear and adding new equipment to allow the plant to process heavier and more sour grades of crude, the company said.
Harvest, which has run Canada’s easternmost refinery for nearly two years, described the projected return on such an investment as compelling.
In February, it had forecast costs for upgrading the plant at more than C$1 billion. Harvest had also said previously that capacity could be expanded to 155,000 barrels a day or more.
It said its next steps before making a go-ahead decision include a more detailed evaluation of the engineering firm’s data, a study of financing options and identification of potential partners in the development.
That process could take about a year, spokeswoman Cindy Gray said.
The focus on financing and partners is key for Harvest, which does not have the financial wherewithal to undertake such a large project on its own, Jill Angevine, analyst at FirstEnergy Capital Corp, said.
Such an expansion project could take about five years to complete, Angevine said.
The refinery was built in 1971, and has changed hands several times since, sometimes sitting idle. Harvest, which was best known for its Western Canadian oil and gas operations, bought it from Dutch trading firm Vitol for C$1.6 billion in late 2006.
Harvest’s is not the only refinery project being considered on Canada’s East Coast.
Nearby, Newfoundland and Labrador Refining Corp has proposed a $4.6 billion refinery to process 300,000 barrels a day, although its efforts have been hampered by difficulties attracting financing amid the credit crunch. It won protection from creditors in June, allowing it to devise a restructuring plan.
In New Brunswick, Irving Oil Ltd is planning a C$7 billion, 300,000-barrel-a-day plant that would double its refining capacity.
Harvest trust units were up 45 Canadian cents, or 2 percent, at C$19.90, on the Toronto Stock Exchange. ($1=$1.06 Canadian)
(Reporting by Jeffrey Jones; Editing by Bernadette Baum)
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