Approximately only a month ago the first new refinery in decades was announced to be under construction in the lower 48 states. This is not to be the last, as the absolutely unparalleled growth of the tarsands is leaving bottle neck-like conditions for transporting the sludge-then-crude-then petrol through the refining processes across Turtle Island. Husky will no doubt go along with some of the foreseen upgrading of facilities, rather than worry about an entirely new refinery. It's all a part of the largest project in history.
--M
Husky on the prowl for refining capacity
NORVAL SCOTT
http://www.theglobeandmail.com/servlet/story/LAC.20070716.RHUSKY16/TPSto...
July 16, 2007
CALGARY -- Husky Energy Inc. says it is on the lookout to acquire more North American refining capacity to process future output from its oil sands projects, despite its acquisition of Valero Energy Corp.'s 165,000-barrel-a-day refinery in Lima, Ohio, for $1.9-billion (U.S.) this year.
While the company has evaluated many options, including purchasing another refinery or building a new greenfield facility, those appear expensive and Husky may seek to swap its oil sands equity for a stake in a U.S. refinery, as EnCana Corp. and ConocoPhillips Co. did last year, said Gary Mihaichuk, Husky vice-president of oil sands.
"Quite frankly, there aren't a lot of refineries for sale, so if you try and buy one the price is really high, considering how well the [refining] industry is doing right now," he said.
"A practical solution may be a joint venture with someone, along the lines of the EnCana-ConocoPhillips deal."
Husky, which produced 360,000 barrels of oil and gas a day in 2006, expects to extract 500,000 barrels of crude a day from its oil sands operations alone by 2020, with the 200,000-barrels-a-day Sunrise development expected on-stream in 2010.
However, because oil sands crude is heavy and difficult to refine, the company - like other Canadian producers - needs to find refineries to process its extra output in order to bring it to market.
Last year, EnCana reached a $10.7-billion deal with ConocoPhillips whereby the companies exchanged oil sands and refining equity, resolving most of EnCana's immediate downstream needs, while Husky followed suit earlier this year by buying the Lima facility.
However, the Lima acquisition won't meet all the company's future requirements, and it isn't even enough to accommodate all of the crude from the first stage of the Sunrise development.
Nevertheless, it gives Husky breathing space to look at other solutions, and the company will now spend three to six months evaluating whether it will retool Lima - a refinery that mainly processes light crude - to take heavy crude from Sunrise, or whether to find another solution that could provide better economics, Mr. Mihaichuk said.
While Mr. Mihaichuk didn't say whether Husky is involved in discussions with any refiners over a deal, Marathon Oil Corp. has indicated that it's keen to link up with an oil sands producer and could be a possible partner for Husky.
BP PLC has also said it might take more Canadian heavy crude at its U.S. refineries, although the company has historically been cool on oil sands involvement.
