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PetroCan not hunting for U.S. refinery
June 5, 2007 / 4:51 PM / 10 years ago

PetroCan not hunting for U.S. refinery

<p>Ron Brenneman, president and chief executive officer of Petro-Canada, talks during the Reuters Global Energy Summit in New York June 5, 2007. REUTERS/Brendan McDermid (UNITED STATES)</p>

NEW YORK (Reuters) - Petro-Canada PCA.TO would rather build its own additional refining capacity than follow its national rivals in buying capacity in the United States, its chief executive said on Tuesday.

Suncor Energy Inc. (SU.TO), EnCana Corp. (ECA.TO) and Husky Energy Inc. (HSE.TO) have bought into the U.S. refining business in an effort to secure processing for Alberta oil sands production, which is expected to surge over the next decade.

Petro-Canada, in contrast, is spending C$2 billion ($1.9 billion) to convert its Edmonton, Alberta, refinery to run oil sands-derived crude solely. It is due to be complete in the third quarter of 2008.

By building its own capacity, it keeps the equity it holds in Alberta oil sands. “We can retain all of our interest in the upstream asset and go ahead and build our own upgrading facility,” Petro-Canada CEO Ron Brenneman said at the Reuters Global Energy Summit in New York.

U.S. Midwest refiners, such as Marathon Oil Corp. (MRO.N) and BP Plc (BP.L), have been hunting for Canadian oil sands partners as they make plans to retool their refineries amid declining supplies of conventional North American light oil.

Petro-Canada has the project management and financial wherewithal to pursue its integrated oil sands strategy without taking on refining partners, Brenneman said.

“I‘m not saying it’s not the right thing to do for some companies that don’t have that capability. (For them) it’s absolutely the right thing to do, but we’re not in that situation,” he said.

Oil sands and refining represent decades of opportunities for Petro-Canada as the worldwide oil industry struggles to find new assets to reinvest their gusher of cash flow, Brenneman said.

The company plans to announce a long-awaited configuration and cost estimate for the first phase of its Fort Hills oil sands project by early July. The overall cost of Fort Hills -- a major part of its Alberta oil sands strategy -- will likely be “C$10 billion-plus,” Brenneman said.

Like all oil sands developers, Petro-Canada and its Fort Hills partners, UTS Energy Corp UTS.TO and Teck Cominco Ltd. TCKb.TO, are working against soaring costs for skilled labor and materials like steel as they develop their plans.

The company has said it is considering a first phase that is as small as 70,000 barrels a day and as large as 170,000. The company has pegged the rough cost range at between C$90,000 and C$120,000 per daily producing barrel.

The partners’ next stage will be deciding whether to go ahead with C$1 billion worth of engineering work aimed at bringing the project to full-scale operation, he said.

“That’s a pretty significant commitment in and of itself, although in the total scheme of things this is probably a C$10-billion-plus project, so it’s a pretty good down payment but it’s not the ultimate project,” he said.

Besides Fort Hills, Petro-Canada is working on an expansion of its MacKay River steam-assisted oil sands project and making long-term plans for a similar one called Lewis.

Despite its other Alberta oil sands projects, Brenneman said Petro-Canada has no intention of selling its 12 percent stake in the Syncrude Canada Ltd. project, which last year completed an C$8.4 billion expansion.

“It has future expansion capability, which we’d be quite happy to do. It’s very closely integrated with our Edmonton refinery,” he said. “It’s very much a part of Petro-Canada, so it’s not an asset we’d be looking at selling.”

Petro-Canada shares were off 20 Canadian cents at C$55.14 on the Toronto Stock Exchange.

$1=$1.06 Canadian

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