Come By Chance would be tough sell: consultant

Ashley Fitzpatrick
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Talk of a potential sale of the Come By Chance oil refinery stepped up this week, with the Wall Street Journal reporting the Korea National Oil Corp. (KNOC) has hired Deutsche Bank to handle the sale.

Come By Chance oil refinery. — File photo by Gary Hebbard/The Telegram

The report cited “people familiar with the matter,” though the assertion has not been confirmed by The Telegram.

Rumours of a sale started the first week of September, with reports out of Seoul stating a KNOC representative said the company was considering unloading Canadian assets. Those assets would include the refinery at Come By Chance, operated by the KNOC subsidiary Harvest Energy Trust.

At that time, Harvest spokeswoman Kari Sawatzky could shed no light on the likelihood of a sale of Come By Chance.

The company’s refining operation lost $106.6 million in the first half of 2013 and recorded a $92-million operating loss for the same period in 2012.

“It’s a tough market and it doesn’t surprise me that refinery’s been struggling with its profitability,” said Michael Ervin, principal at MJ Ervin and Associates, a division of the Kent Group.

If a sale is indeed in the works, Ervin believes it will be a tough sell.

“I don’t think the prospects are very good,” he said Thursday, pointing to an existing surplus of refining capacity relative to demand.

As well, “Atlantic Basin refineries in North America are a little more challenged in terms of gaining access to what’s currently lower-priced feedstocks coming from the Canadian and American mid-west,” he said.

Being island-isolated, the refinery in Newfoundland and Labrador is stuck sailing in feedstock, unable to tap rail for supply.

“The difference now today compared to, let’s say a decade ago, with respect to feedstock costs is that 10 years ago continental feedstock costs were on a par with waterbourne feedstocks, crude oil feedstocks. That’s not the case today,” Ervin said.

Construction of the Come By Chance refinery was started in 1971 and finished in 1973, under Shaheen Resources. That company went bankrupt in 1976.

In 1986, Newfoundland Processing Ltd. re-started the operation, controlling it until a sale in 1994 to the Vitol Refining Group.

The operation became North Atlantic Refining Limited and was run by Vitol until 2006, when the refinery was sold once again — this time to Harvest Energy.

Harvest’s operation was bought up by KNOC in 2009.

Organizations: Vitol, Newfoundland Processing, North Atlantic Refining

Geographic location: Seoul, North America, Newfoundland and Labrador

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Recent comments

  • James
    September 19, 2013 - 18:57

    So....along with its horribly reconfigured digital edition, the Telegram no longer posts comments...and, on the rare occasion it does, its usually a day later. You type in that crazy, almost impossible to read, authentication code and then - nothing! It keeps giving you another code to copy, but your text goes nowhere.

    September 19, 2013 - 16:50

    The Come-by-Chance refinery has strategic value for NL. Properly positioned in the marketplace, it could capture a significant share of the provincial demand for distillates. Moreover it has implications for downstream diversification and value extraction from the Province's offshore. I would have suggested NALCOR as a possible buyer with the operation contracted to an experienced international management group. But NALCOR has already shown its ineptness in the planning, management and balancing of interests between its hydro-electric mandate and its offshore petroleum mandate. Dwight Ball and Paul Antle (hopefully the only two Liberal leadership candidates with a prospect of winning) need to look carefully at this issue. Either or both should consider adopting as a plank in their platform the splitting of NALCOR down the middle. NL Hydro would resume direct responsibility for electrical generation while a revamped NALCOR would be responsible for petroleum (offshore, onshore, upstream and down). Both would report independently to Cabinet. Had this been the case all along, I don't think we'd be knee deep in the Muskrat Falls fiasco right now. There would have been a healthy competitive play between the two crown corporations such that one would keep the secret, ambitious, absurd empire building notions of the other in check.

  • david
    September 19, 2013 - 07:04

    Too bad the Come-By-Chance refinery wasn't a "tough sell" back when Joey Crazy signed us up for it in the 70' era of complete folly that doomed this place for eternity. Good luck finding a "greater fool" than us.....

  • Jack
    September 19, 2013 - 06:44

    The other problem with selling the Come By Chance refinery is the sneaky covenants imposed on it no thanks to Petro Canada. When this refinery was sold to Bermuda based Newfoundland Energy in 1986, Petro Canada imposed a sneaky covenant on this refinery which applied to Newfoundland Energy and all future and current owners such as Vitol, Harvest Energy, and KNOC, and that is the refinery cannot sell refined oil products to the Canadian Market other than Newfoundlanders and Labradorians. The other problem with selling the refinery is that closing it will result in jeopardized energy security for the Atlantic Provinces as Dartmouth's ESSO refinery will be converted into a terminal in 2014 and 2015. Closing both the Dartmouth and Come by Chance refineries could take up to 200,000 barrels of crude out of the system, resulting in substantially higher prices for Atlantic Canadians. Therefore, the new owners will not only have to renegotiate with Petro Canada to eliminate the sneaky clauses imposed on the refinery, but also keep the refinery running at Come by Chance to maintain Atlantic Canada's already crippled energy security, and ensure that any oil harvested in Newfoundland is produced at Come By Chance to maintain value added jobs here.