Canada refinery project in Sarnia has merit

Interview article by Stefan Baumgarten

TORONTO (ICIS)–A group of Canadian oil and petrochemical executives is proposing a new refinery at the Sarnia petrochemicals hub in Ontario in a bid to boost downstream refined fuels and petrochemicals production within Canada.

In a base case scenario, the refinery would process some 50,000-100,000 bbl/day of crude shipped in via two existing pipelines from Alberta’s oil sands, to produce primarily diesel fuel and petrochemicals, Walter Petryschuk told ICIS in an interview on Friday.

The retired petrochemical engineer and former manager of Suncor’s Sarnia refinery is an associate at Sarnia-based Bowman Centre. The centre seeks to identify and help develop new big energy projects in Canada.

Petryschuk said that the business case for the refinery is driven by the need to process more of Canada’s crude oil within the country – rather than just shipping it unprocessed to refineries in the US, which ends up costing Canada “billions of dollars” in potential added value, along with many jobs.

Furthermore, despite having four refineries – three at Sarnia and another one at Nanticoke on Lake Erie – Ontario, which is Canada’s largest fuel-consuming province, still needs to rely on imports for part of its refined fuel requirements, he said.

In petrochemicals, the refinery could also help replace benzene supplies in Sarnia that were lost following the conversion of NOVA Chemicals’ cracker to shale gas-based feedstocks.

Importantly, the project proposed by Petryschuk and his colleagues at the Bowman Centre could be developed immediately as it would build on existing infrastructure at the Sarnia hub, which includes refineries, ethylene crackers, as well as polyethylene (PE) and other chemical plants. 

Petryschuk acknowledged that Shell seven years ago decided not to go ahead with plans for a new refinery in Sarnia.

However, that decision was driven by Shell’s global capital allocation priorities and therefore by no means undermines the case for the Bowman project, he insisted.

“In fact, in talking with people who are ‘in the know’, and I won’t mention any names, there was no question that the [Shell] project was viable,” he added.

Likewise, a proposed refinery project on the British Columbia coast would not hurt the case for the Sarnia project, he said.

Rather, Canada will have more than enough production from Alberta’s oil sands in the years ahead to feed the Sarnia, the British Columbia and other downstream projects, he said.

The Bowman team has already approached a number of companies who have expressed interest, Petryschuk said, without disclosing names.

Furthermore, the group is in talks with the Ontario provincial and Canada’s federal governments, he said.

The project’s prospects improved with the new federal government under Prime Minister Justin Trudeau, whose Liberals in elections last month ousted the Conservatives after nearly 10 year in office.

“It’s going to take provincial-federal cooperation, and [with Trudeau] they are now cooperating much more than [under the Conservatives],” he said.

“There is no question in my mind that the amount of money being shipped out of Canada as an export raw material warrants a significant change in strategy on the part of our [provincial and federal] governments,” he added.

Meanwhile, domestic crude processing will get a boost with the start-up, expected next month, of Enbridge’s Line 9 oil pipeline. That 300,000 bbl/day project involved the expansion and flow reversal of an existing pipeline to go from west to east. Running out of Sarnia to Montreal, Line 9 will supply Quebec’s two refineries with crude from western Canada, replacing imported crude.

However, another big proposed west-to-east Canadian oil pipeline project, TransCanada’s 1.1m bbl/day Energy East from Alberta to refineries in Quebec and New Brunswick, has met with opposition in Ontario and Quebec.

Environmentalists argue that Energy East would lead to increases in emissions from crude production it would encourage in Alberta’s oil sands sector – echoing similar concerns raised by US groups against the proposed Keystone XL oil pipeline from Alberta to the US.

However, analysts have noted that the recent US decision to officially reject Keystone XL may end up providing tailwind for downstream value-added refining and petrochemicals projects within Canada.

Over the years, Canadian chemical industry and labour union officials have often called for Canada to upgrade much more of its vast energy resources within the country, rather than just exporting them.