Nfld. & Labrador

Credit meltdown putting Newfoundland refinery expansion in doubt: owner

The global financial crisis means work on a massive expansion at Newfoundland and Labrador's only oil refinery could be delayed until 2010, its Calgary-based owner says.

The global financial crisis means work on a massive expansion at Newfoundland and Labrador's only oil refinery could be delayed until 2010, its Calgary-based owner says.

North Atlantic Refining had been assembling a $2-billion expansion so that it could process fuels for new product lines.

But Harvest Energy Trust, which bought the Come By Chance refinery in 2006, said the global market meltdown is drying up financing lines.

"This is a project that will wait a number of years, if necessary," said chief executive officer John Zahary.

Zahary told CBC News Thursday that the expansion may be on hold for 18 months. The company, he said, can still do engineering work, and look to the markets for financing later.

"That would be another logical point to go raise financing, at that point, 12 to 18 months down the road," he said.

Harvest Energy Trust has been seeking a partner for the expansion project since it acquired the refinery from Swiss-based oil giant Vitol.

But Zahary said tumult in the world's stock exchanges and collapses of major financial institutions have meant that many investors are simply not spending.

"Given the state of capital markets today [and] that some of our prospective partners may prefer to look at it a few months down the road, this is an opportunity we retain," Zahary said in an interview.

"We don't need to do it in the near term. It's an opportunity we retain for the future, as and when the capital markets settle down."

A delay may come as a blow to the Placentia Bay area, where proponents of a second refinery have also run into severe financial problems.

Newfoundland and Labrador Refining Corp., which has not yet been able to secure $5 billion in the financing it needs to proceed, is currently fighting for its survival from creditors in Newfoundland Supreme Court.

 Danielle Hickey, a pipefitter apprentice from Southern Harbour, hopes to work on one of the projects, and was discouraged about North Atlantic Refining's setback.

"I mean, everyone was looking forward to it," she said.

"As of now, there's nowhere else but Alberta to go. There's nothing around here."