Irving Oil targets summer for tanker shipments of Western Canadian crude

Refiner says it has regulatory approval for its plan, which would increase its use of domestic oil from offshore Newfoundland and Western Canada.

Refiner says it has regulatory approval for its plan, which would increase its use of domestic oil

An oil tanker moors in Burrard Inlet on B.C.'s West Coast in 2019. Irving Oil plans on using foreign tankers to take crude from Western Canada to its refinery operation in Saint John, N.B. (Ben Nelms/CBC)

Irving Oil, the operator of the country's largest refinery, is aiming to begin receiving more crude from Western Canada — delivered to New Brunswick in tanker ships — starting this summer.

The privately held refiner applied last month to the Canadian Transportation Agency (CTA) to use foreign tankers in order to increase the amount of domestic crude it gets from offshore Newfoundland and Western Canada. 

Iriving Oil's application included a proposal for the tankers to transport oil from a terminal in Burnaby, B.C., through the Panama Canal and on to Irving Oil's refinery in Saint John, N.B.

On Friday, a company official confirmed the applications had received regulatory approval and it is now working through the details of the federal process for approving individual vessels.

"Over the ... next few weeks here, we'll be acquiring crude oil, organizing shipping and then finalizing the approvals for those ships to transport the crude oil," said Kevin Scott, chief refining and supply officer for Irving Oil.

Scott said they hope to receive their first barrels from Western Canada by ship in late June or early July.

 The company wants to increase the mix of Canadian crude it uses, which is currently in the range of 20 per cent.

"We'd love to see that get much higher and get above the majority — if technically it works and from a logistics perspective all of that works out," he said. 

Increasing the amount of Canadian oil the refinery uses would displace the crude imports the company gets from around the world, but it's not clear which shipments might be affected. 

Scott said the refinery uses a "significant" amount of oil from the United States.

Irving Oil's refinery in Saint John is the largest in Canada with a capacity to refine 320,000 barrels of oil per day. (CBC)

"Part of this is really opening up the option for us to run more Canadian crude," Scott said.

"We have limited options today. And, really, when we're being challenged to be creative in terms of Canadians helping Canadians, this was one way that we said it was possible for us to do that.

"And, of course, all of the approvals and issues around the ships is really what we're working to get in place ... so that we have that option to buy Canadian crude as easily as we buy crudes from anywhere else in the world."

That could be welcome news for a sector that has been hit hard by a steep plunge in demand for fuel as both consumers and businesses throttle back activity in the face of the COVID-19 pandemic. 

Earlier this week, the Canadian Association of Petroleum Producers said, in the short term, the Irving proposal offers a "desperately needed" expansion of the domestic market.

Alberta Energy Minister Sonya Savage said Friday she is glad Irving Oil will begin using more Western Canadian crude, adding that Alberta produces enough to supply the country.

"However, it is unfortunate that Irving is forced to use complicated marine shipping routes either around the entire continent or up from the Gulf of Mexico," she said in a statement.

"The proposed Energy East Pipeline would have provided a safe and faster route."

In its application to the CTA, Irving Oil said it recognized recent events had caused the economy, and the energy sector in particular, to be in a state of crises, and that "it is a time for Canada to come together."

The application stated that it is the company's intent to enter into long-term agreements with Canadian crude suppliers for the nomination of barrels over a one-year timeframe.

Irving Oil's plan is to use foreign oil tankers to ship Canadian crude from three key points, including from the West Coast, down through the Panama Canal and on to Saint John.

It also wants to take delivery of Canadian oil from suppliers in Newfoundland and Labrador, as well as terminals on the U.S. Gulf Coast, where crude from Western Canada can be delivered by pipeline.

Irving Oil currently receives some oil from offshore Newfoundland as a routine part of its mix, Scott said, as well as a "small amount" of Western Canadian crude by rail.

"This would increase our capability to get access to Western Canadian crude, either from Vancouver or from the U.S. Gulf Coast, which is a slightly shorter route," he said.

Asked if the company's refinery could use Alberta's heavy grade of oil, Scott said it can use "some amount" and that it has been doing modelling and testing.

"Today we run some synthetic crude oil, which is lighter, from from Western Canada," he said. 

"This will allow us to access the heavier crude by marine [transportation]. But we would expect that it will be a mixture of crudes. Much like our refinery today, we would run a mixture of different types of crudes from different locations, ultimately to get the right mix to make the products that we're looking for."


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