May 9, 2006 at 1:04 am #4201
By Bill Graveland
26 Apr 2006 at 08:08 AM EDT
CALGARY (CP) — A chronic labour shortage and fears of escalating construction costs isn’t about to scare Petro-Canada away from building a needed new heavy-oil upgrader.
”We still do plan to build an upgrader. We’ve chosen the location of Edmonton, consciously, to avoid as much of the pressure in the Fort McMurray as we can,” president and chief executive Ron Brenneman said after Petro-Canada’s annual meeting Tuesday.
“I would say the choice of Edmonton will be a factor in the kind of skilled tradespeople and productivity that we can expect at that project so at this point we don’t consider that to be a particular issue,” he added.
Brenneman’s views vary with those of Husky Energy president and CEO John Lau, who indicated last week that his company would likely look at the United States as the location for a new upgrader.
”Under the current economics and the labour supply and the cost of construction it is very difficult and challenging to make a decision to maintain building in Canada,” Lau said.
”We couldn’t get enough labour and enough timing so the alternative is looking at somewhere we can expand our operation who can accommodate our products,” he added.
Petro-Canada is still in the planning stage for its upgrader, which will have a capacity of 100,000 to 170,000 barrels per day.
”How much will it cost? That’s exactly what we’re working on right now and by the end of the year we’ll have a better fix on not only the scale but the phasing and the initial cost estimate that we would attribute to that,” said Brenneman.
Petro-Canada has reported a 75% jump in net income in the first quarter on a one-time gain, as a big tax charge in Britain and operational problems hampered the integrated energy company.
Petro-Canada earned C$206 million or 40 cents per share in the January-March period, up from C$118 million or 23 cents per share in the year-earlier quarter. Revenue swelled 28% to C$4.19 billion from C$3.28 billion.
High oil and gasoline prices will likely remain the norm, largely because there is between five and 10% less refining capacity than is required to actually meet product demand in North America, said Brenneman. Even with the lack of refining space though, Petro-Canada isn’t considering building a new refinery in Canada to relieve the pressure.
”The history of this industry is it has not been particularly profitable. If it had been, it would have attracted capital for expansions,” he said.
”The difficulty has been trying to justify economically and also environmentally, establishing a new refinery in a greenfield site – there hasn’t been a new refinery in North America for 30 years now.”
Meantime, Brenneman said he didn’t expect any movement in the Hebron heavy-oil field off the east coast of Newfoundland any time soon.
The project, expected to generate more than 600 million barrels of oil, has been shelved after a dispute between Exxon Mobil Corp. and the government of Newfoundland and Labrador.
Negotiations between the province and the consortium developing Hebron broke down in part over Newfoundland’s insistence on gaining an equity stake in the project.
Brenneman said it’s still an attractive project.
”We all believe as partners that it’s fundamentally sound so in time it’s our belief that this project will move ahead,” he said.
”What it requires is an agreement between ourselves and the province on the fiscal terms that are appropriate. When might that happen? It’s not a month away, it’s not six months away, it might not even be a year away,” Brenneman said.
”Not only would we have to re-engage with the province on those fiscal terms but the project team has been disbanded so you would have to reassemble the project team and restart the project,” he said.
May 9, 2006 at 1:10 am #7602
PetroCanada still plans to build an upgrader (with coker) and Edmonton remains the chosen location. The high price of crude oil should help them weather the labor & construction cost issues.
Their position seems to vary a great deal from Husky Energy who now indicates it is looking in the US – an unlikely spot given all the difficulty encountered by US & other foreign Energy firms trying pull off the addition new grassroots refinery for last 2 decades, sounds more like a negotiating position rather than planning consideration.
January 8, 2007 at 11:39 am #7488
Petro-Canada Boss Still Planning to Build Upgrader
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