Newfoundland government to fund refinery as search for buyer continues

(Reuters) - Canadian province Newfoundland and Labrador will give North Atlantic Refinery Limited C$16.6 million ($13.05 million) to keep its 135,000 barrels per day Come-by-Chance plant idled as the owner seeks a new capital partner, the provincial government said on Friday.

FILE PHOTO: Ships are seen docked in the St. John's Harbour in St John's, Newfoundland and Labrador, Canada, October 17, 2018. REUTERS/Chris Wattie/File Photo

The funding agreement will cover 75% of eligible labor costs of refinery employees and 50% of eligible non-labor costs in Newfoundland and Labrador to keep the refinery warm in case of a future restart, according to a release from the government.

“Part of this agreement includes a commitment by NARL LP and its owners that it will continue its ongoing buyer/investor search for the refinery,” said Andrew Parsons, minister of industry, energy and technology.

The plant has been idle since early April, with about 100 workers operating the plant, down from the 400 full-time employees the refinery employed prior to the shutdown.

It supplied major U.S. East Coast harbors including New York and Boston, but was the first North American refinery to idle as fuel demand collapsed during the coronavirus pandemic.

Approximately 200 workers will be employed at the facility as a result of the new funding agreement.

“Currently, maintenance of the refinery requires North Atlantic to incur significant monthly financial losses. This funding will offset labour and operational costs related to maintaining the refinery in idle mode,” North Atlantic Refinery said in a statement.

Come-by-Chance has been looking for a new owner after Irving Oil backed away from a purchase and share agreement in October shortly before it was set to close on acquiring the company.

The company also received interest from U.S.-based energy company Origin International in restarting fuel processing there in “a more environmentally sustainable model.”

Parsons told Reuters in a phone interview that conversations with entities interested in buying Come-by-Chance were continuing this year. He also said the provincial government had discussed buying the plant itself, but had concerns about its lack of expertise in refining.

In December Newfoundland and Labrador announced it would give C$41.5 million to the idled West White Rose offshore oil project, now owned by Cenovus Energy. That money came from the federal government’s C$320 million Oil and Gas Recovery Fund, launched last year to support Canada’s struggling offshore oil industry. The funding for Come-by-Chance came from a contingency fund in the provincial government’s budget, Parsons said.

($1 = 1.2724 Canadian dollars)

Reporting by Laura Sanicola and Nia Williams; Editing by Steve Orlofsky