Reuters article on proposed refineryInvestor group studying huge Newfoundland refinery
10/02/06
By Jeffrey Jones
CALGARY, Alberta (Reuters) - A newly formed private company has launched a study into building a massive oil refinery on Newfoundland's coast to serve tight gasoline markets, especially in the U.S. Northeast, one of the executives behind the plan said on Friday.
Newfoundland and Labrador Refining Corp. will spend the next 42 weeks determining if markets are ready for a 300,000 barrel a day plant on Placentia Bay in the province's southeast, said Brian Dalton, chief executive of Newfoundland-based Altius Minerals Corp.
It would cost at least $2 billion, he said.
Such a plant would be among the largest in North America and the first built in the continent in more than two decades. Analysts have said tight refining capacity has been a big factor behind surging oil and fuel prices.
"When you look at refined products, the market is pretty integrated North America-wide, but from a proximity-to-markets perspective, the U.S. Northeast is a huge component and we're specifically modeling where the best openings are there right now," Dalton said.
The feasibility study is expected to cost $7 million.
Besides Altius, which is a mining firm, Newfoundland and Labrador Refining's investors are Dermot Desmond, founder of Dublin-based International Investment and Underwriting; Scottish financier Harry Dobson; and Stephen Posford, former head of European operations for investment bank Salomon Brothers.
The Placentia Bay region is also site of the 105,000 barrel a day Come-By-Chance refinery, run by North Atlantic Refining Ltd., a unit of Swiss energy trader Vitol SA.
Vitol said in December it is seeking a buyer for the plant, which is more than 30 years old and which requires hefty investment to bring it up to modern standards.
Dalton said its decision to sell is not related to a lack of market opportunities for petroleum products.
"I think you've got to look at Vitol and some of the things they've said. They're primarily and marketing and trading firm. This hasn't been their normal business to be in," he said.
"Overall we do know that certainly globally there's an opening right now in terms of refining capacity."
The last refinery built in North America was Shell Canada Ltd.'s 98,000 barrel a day Scotford plant near Edmonton, Alberta, which started operations in 1984.
Newfoundland and Labrador Refining is not looking to any one region for crude supply for the proposed plant. Oil could come from the North Sea, Middle East or the growing offshore Newfoundland region, Dalton said.
"We've got to take a bigger-picture, Atlantic-wide view," he said.
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