Irving Oil Finally Obtains Authorization To Supply Oil In Alberta – But Through The Panama Canal

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CALGARY – After failing to secure western Canadian oil via the Energy East pipeline scrapped in 2017, Irving Oil Ltd. was finally able to obtain federal government approval for a new road to link the oil sands to its refinery on the East Coast.

But this time, it will bypass the provincial and environmental opposition encountered during the construction efforts of this pipeline, as the oil will be shipped by foreign tankers from British Columbia to its refinery in Saint John, New Brunswick, via the Panama Canal.

Irving spokeswoman Candice MacLean told the Financial Post that the company has received federal government approval to “source additional Canadian crude for our refining operations.”

“From western Canada off Newfoundland, we are expanding our reach while continuing to look for solutions that help create energy security for our country,” she said in an email.

Irving had applied to the Canadian Transportation Agency on April 16 for permission to use the roundabout route “urgently”.

Irving Oil refinery in Saint John, New Brunswick.

Irving Oil refinery in Saint John, New Brunswick.


Peter J. Thompson / National Post Files

The company was already in talks “for a quick acquisition” of Canadian oil “for immediate delivery to its refinery through the Panama Canal,” through medium-sized tankers called Aframax.

“It is essential for our customers, for our business and for energy security across Atlantic Canada that we be able to use foreign tankers to urgently access western Canadian crude oil and move forward for a year to allow flexible supply chain planning and to strengthen the bond between Canadian oil producers and our refinery in this difficult and uncertain time, “wrote Kevin Scott, Director of Refining and Chief Sourcing, Kevin Scott, in the request.

Irving Oil was one of the first to support the $ 15.7 billion Energy East project proposed by TransCanada Corp. in 2014 to link the oil sands to the East Coast.

Irving has committed to build a new $ 300 million terminal at its Canaport facility in Saint John to accommodate shipments from the proposed pipeline. But TransCanada – now known as TC Energy Corp. – suspended the project in 2017 in the midst of opposition from the governments of Quebec and Ontario and retained opposition from certain environmental groups and local communities.

According to Sea-distances.org, Irving’s new solution for accessing oil would assume that western Canadian oil travels 6,300 nautical miles, or 11,771 kilometers, more than double the length of the abandoned Energy East pipeline. 4,600 kilometers.

Irving Oil is also seeking to source Canadian oil from ports in Texas and Louisiana.

“In addition, Canadian oil is also available from Canadian crude producers at the Gulf Coast terminals in the United States,” Scott wrote in the request. “To maintain flexibility with crude oil suppliers, Irving Oil must have the opportunity to acquire Canadian oil both in British Columbia and on the Gulf Coast.”

Irving Oil refinery in Saint John, New Brunswick.


Peter J. Thompson / National Post Files

Some analysts believe that the West Coast and the Gulf Coast of the United States may become a longer-term option for Irving, which has the capacity to process a wide variety of light and heavy crudes at its Saint John refinery, the most Canada’s largest oil refinery with a processing capacity of 320,000 barrels per day.

The Irving Diversion Route is seen as a new way to circumvent regulatory blockages in Canada that have blocked a number of pipelines.

“We have never looked at this path,” said Dinara Millington, vice-president of research at the Canadian Institute for Energy Research, who studied the subject in depth.

Millington said the expansion of the federally-owned Trans Mountain pipeline and Keystone XL projects supported by TC Energy will boost Canadian oil shipments to both British Columbia. and the American coast of the Gulf of Mexico, “so if Irving can secure these ships in the longer term, yes, it must be economical at the door of the refinery.” “

A raw car at the Irving Oil refinery.


Peter J. Thompson / National Post Files

Price dynamics between the Western Canadian Select, West Texas Intermediate and Brent heavy oil benchmarks could also lead Irving to supply WCS in the long term. The WCS benchmark was up 7 percent to US $ 15.06 per barrel in Monday Monday trading, trading at nearly US $ 5 off the WTI.

“You would still have heavy crude oil at a price lower than WTI or Brent, so that in itself could be an economic argument for Irving,” said Millington.

Irving would not say directly whether the decision to bring western Canadian oil to the east coast of the US coast of the Gulf of Mexico was a long-term strategy, given that the 830,000 barrel Keystone XL pipeline project per day is currently under construction.

“At the moment, we are focusing on working with our partners on the immediate next steps needed as we move forward on this initiative,” MacLean of Irving said in an email.

In April, TC Energy obtained a $ 1.5 billion investment and loan guarantees from the Government of Alberta and began construction of the KXL pipeline, which is contemplated as a link line between Alberta and the heavy oil refineries on the US coast of the Gulf of Mexico.

The Irving Oil refinery can be found in this aerial photograph taken over Saint John, New Brunswick.


Aaron McKenzie Frazier / Bloomberg files

“Keystone XL is rooted in a fundamental long-term need for new energy infrastructures, improved public security, a reduction in greenhouse gas (GHG) emissions, economic support for communities, creating jobs and ultimately a reliable and affordable energy supply, ”TC Energy CEO Friday, Russ Girling said at the company’s annual shareholders’ meeting.

Girling has previously stated that the Energy East project, which was proposed when Keystone XL was in regulatory limbo in the United States, is unlikely to be revived due to the uncertainties associated with the regulation of pipelines on Bill C-69 , a controversial law governing the energy sector that was approved by Ottawa last year.

TC Energy also signed more natural gas customers on its long distance pipelines between Western Canada and Ontario, which would have been reused if the Energy East project had been built.

Meanwhile, work on the Trans Mountain 590,000 bp expansion project is also underway to increase crude oil shipments between Alberta and British Columbia.

Originally envisioned as a new export route to transport Canadian oil to Asia, Millington of CERI said barrels of TMX could also travel to the east coast of Canada.

Financial Post

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