Valero aims to cut costly crude imports to Quebec refinery

Wed May 29, 2013 6:02pm EDT

Related Topics

* Valero plans to use more Canadian crude at Quebec refinery

* Company supports Enbridge's proposal to reverse Line 9

* Valero expects to own fleet of 12,000 rail cars by 2015

CALGARY, Alberta, May 29 (Reuters) - Leading independent U.S. refiner Valero Energy Corp said on Wednesday it will spend up to $190 million to enable its Quebec refinery to use more cheap Western Canadian crude rather than relying on pricier imports.

The company plans to build a rail off-loading facility at its 265,000 barrel per day Jean Gaulin refinery in Levis, Quebec, and expand the terminal at its Montreal East facility, in anticipation of the proposed reversal of Enbridge Inc's Line 9 pipeline connecting Ontario and Quebec.

"This will make oil available to the refinery to process Western Canadian crude rather than expensive cargoes from West Africa and the North Sea," Valero spokesman Bill Day said.

"Western Canadian crude is some of the least expensive oil on the planet right now."

A reversed Line 9 would transport up to 300,000 bpd, and ship western Canadian crude eastward rather than transporting more expensive Brent crude oil from the North Sea, West Africa and the Middle East in a westbound direction.

Day said the refinery would take light, sweet Western Canadian crude rather than oil sands crude. A barrel of light, sweet crude for July delivery in Edmonton, Alberta, last traded at $7.25 below the West Texas Intermediate benchmark.

The Jean Gaulin refinery currently receives all its crude by ship, mostly from foreign sources, but also a limited amount via Valero's license to ship Eagle Ford crude from its Texas operations to Quebec.

Day said Valero intends to move more crude by rail in both the U.S. and Canada, and expects to have its own fleet of more than 12,000 rail cars by 2015.

The company is strongly in favour of a proposal to reverse a section of Enbridge's Line 9 pipeline connecting Ontario and Montreal, Quebec, in order to deliver oil from Alberta, Saskatchewan and Manitoba to eastern markets.

The company plans to buy new ships to transport crude offloaded from Line 9 in Montreal along the St. Lawrence river to its Jean Gaulin refiner.

"The reversal of Enbridge's crude line 9B is not just nice-to-have," Ross Bayus, Valero's president of Canadian operations, said in a speech to the Montreal Board of Trade on Tuesday.

"To be left behind would compromise our competitive position and expose the remaining refining and petrochemical business in Quebec to undue risk."

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