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CALGARY – The main lobby group for Canada’s refinery sector is giving up on building new plants, even as North American oil production surges to record levels.
It’s the latest development in a debate that is older than Canada itself: Whether to refine or otherwise add value to extracted resources at times when it is more profitable to export them in their crudest forms. Federal New Democrats and groups such as the Alberta Federation of Labour have long opposed projects such as TransCanada Corp.’s contentious Keystone XL pipeline on grounds that it will ship domestic processing jobs to the United States.
But rising crude production in northern Alberta and the American Midwest doesn’t imply Canada should build costly refineries at home, said Peter Boag, president of the Canadian Fuels Association, which represents producing companies such as Suncor Energy Inc., Imperial Oil Ltd., Chevron Canada and Royal Dutch Shell Plc.
“It’s not just, as some people would have it, a supply-driven issue,” Mr. Boag said in an interview Wednesday. “The other part of it is where’s the demand for the refined product?”
The industry group is downplaying prospects for new capacity as pipeline giants Enbridge Inc. and TransCanada Corp. seek public and regulatory approval for a number of projects that would ship raw bitumen to markets in the U.S. and beyond.
Those include Enbridge’s Line 9 reversal and expansion and TransCanada’s $12-billion Energy East project, which would funnel up to 1.1 million barrels of Alberta and Bakken oil a day to export points in Quebec and Saint John, N.B.
Mr. Boag said those proposals, if approved, would ease competitive pressures for refineries currently captive to pricier imported oil. But they are unlikely to solve longer-term problems for the plants.
“It’s not a panacea,” he said. “There’s also the demand-side issues in the Atlantic Basin in particular, in what is still an over-supplied market.”
Canada had 18 operating refineries with combined capacity of slightly more than two million barrels daily in 2012, according to government and company statistics. Product demand stood at about 1.8 million barrels a day, the CFA says.
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