UPDATE 3-Imperial shops Nova Scotia refinery as margins lag

Thu May 17, 2012 1:50pm EDT

* Plans include conversion to terminal

* Expects to make decision by Q1 2013

* Says has list of more than 24 potential buyers

By Nallur Sethuraman and Jeffrey Jones

May 17 (Reuters) - Imperial Oil Ltd put its money-losing Nova Scotia oil refinery on the auction block on Thursday, adding to a list of plants on both sides of the Atlantic that face sale or closure due to pricy crude and falling gasoline demand.

The move comes a day after Enbridge Inc detailed a C$2.6 billion ($2.6 billion) plan to pipe cheaper Canadian and North Dakota oil east of Ontario by 2014. An Imperial executive said that is too little and too late to consider holding out with the Dartmouth, Nova Scotia, refinery.

Imperial, the Canadian affiliate of Exxon Mobil Corp , said it will consider both a sale of the 88,000 barrel-per-day plant on the Maritime province's southern coast and conversion into a storage terminal. It aims to make a decision by the first quarter of 2013, depending on response to marketing efforts, Chief Executive Bruce March said.

The company has received a few expressions of interest and plans to market the Dartmouth plant to a list it has compiled of more than 24 potential buyers in the coming months.

It is difficult to put a value on the equipment, largely because of the depressed market conditions for Atlantic Basin refining, Gilles Courtemanche, Imperial's vice president of refining and supply, told reporters at a news conference.

"You have to be realistic. There's still 10 refineries out there for sale as we speak. You have a history of 2009 to today, where of the ones that have reached a marketplace, one out of two sold and the other one shut down," he said.

Courtemanche said the refinery, like many on the Atlantic coast, has been losing money in recent years as gasoline demand dropped and as the imported oil it processes became much more expensive than North American crude, much of which is in oversupply in regions such as the U.S. Midwest and Midcontinent.

The plant processes oil from offshore Newfoundland, the North Sea, West Africa and South America.

More than 2.1 million bpd of refining capacity in the Atlantic Basin has been shut or threatened with closure over the past three years due to razor-thin margins. In Canada, Royal Dutch Shell shut its Montreal refinery and Irving Oil scrapped plans for a massive expansion of its Saint John, New Brunswick, facility.

On Wednesday, Enbridge signaled help was on the way when it detailed a series of moves to get Alberta and North Dakota oil to Eastern Canada, including reversing the flow direction of the 240,000 barrel-a-day Line 9 pipeline between Sarnia, Ontario, and Montreal. The move will allow refineries in the region to cut feedstock costs.

It would not, by itself, provide sufficient quantities of oil soon enough to make a large impact on Dartmouth in the short term, Courtemanche said.

The company has, however, recently gained optimism that it can find a buyer as new players have entered the market, he said.

Last month, Delta Air Lines Inc became the first U.S. airline to buy a refinery in order to control the cost of jet fuel, while private equity firm Carlyle Group was in talks with Sunoco to buy the largest refinery on the U.S. East Coast as an outlet for the surging supply of Bakken crude.

"Now, what's becoming more interesting as time goes by is the fact various people have different business structures, different business drives. Like, who would have thought that an airline company would be interested in buying a refinery more than a month or two ago?" Courtemanche said.

The Dartmouth refinery began production in 1918. It has about 200 employees and 200 contractors at the refinery and related terminals. A sale or shutdown will leave Imperial with plants in Edmonton, Alberta, and Sarnia and Nanticoke, Ontario.

Shares of the company were down 67 Canadian cents at C$41.33 on Thursday on the Toronto Stock Exchange. They earlier touched a low of C$41.29. Exxon Mobil owns 69.9 percent of Imperial.

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