Crashing oil prices force Newfoundland refinery to shut down

A Newfoundland facility is the first North American refinery to become a casualty of the oil price plunge.

North Atlantic Refinery Ltd. in Come by Chance, about 150 kilometres west of St. John’s, announced Monday it will halt production in the face of the COVID-19 pandemic and plunging price of oil. Western Canadian Select, the benchmark price for Alberta crude, hit a new low of US$3.82 a barrel on Monday, before closing at US$4.26

Jette Enevoldsen, chief operations officer of North Atlantic, said in an e-mailed statement the refinery will go into standby mode. A reduced work force will maintain the facility and tackle storage and inventory services.

Ms. Enevoldsen said there are no cases of COVID-19 at the refinery, but it’s being shut down to further prevent the spread of the novel coronavirus that causes the disease.

“These are unprecedented times for every industry. We are making these decisions today to ensure that we are in the best possible position to return to normal operations as soon as it is safe and economically feasible to do so,” she said.

As the North American energy sector watched WCS crash and West Texas Intermediate dip below US$20 on Monday, U.S. President Donald Trump and Russian President Vladimir Putin discussed oil markets and the spread of the coronavirus in a phone call.

The two presidents agreed to have their top energy officials meet to discuss slumping global oil markets, the Kremlin said, as Mr. Trump called Russia’s price war with Saudi Arabia “crazy.”

The agreement marks a new twist in global oil diplomacy since a failed deal this month between the Organization of Petroleum Exporting Countries and Russia to cut production ignited the price war between Russia and OPEC’s de facto leader Saudi Arabia.

The fallout from the COVID-19 pandemic also helped to send oil prices into a historic tailspin, threatening producers in the United States and Canada with bankruptcy. Prime Minister Justin Trudeau reiterated Monday his government would soon unveil federal assistance for oil and gas, along with other hard-hit sectors, including tourism and airlines.

Calgary-based analyst Jeremy McCrea, director of energy research at Raymond James, suspects industry chatter around a support package and potential movement on the Saudi-Russia standoff could have been behind a “peculiar” 12-per-cent uptick in the Canadian energy index Monday.

Mr. McCrea said the “crazy day” underscored the resource sector’s roller-coaster ride of the past month. He added it’s not out of the question that WCS prices could continue to fall, perhaps into negative pricing.

“It’s a very bizarre situation. I don’t think anyone knows what the correct reaction is here and I think ultimately, when it comes to the stocks, I think everyone’s flying blind,” he said. “There’s no energy company in North America making money today."

Take Inter Pipeline Ltd., whose stock tumbled 10 per cent after the company announced a series of moves to cope with the economic slowdown caused by the COVID-19 crisis, including cutting its dividend by 72 per cent and putting the planned sale of European operations on hold. It is also reducing executive compensation.

The Calgary-based company had planned to sell its bulk fuel businesses in Britain, Ireland, Germany, Denmark, the Netherlands and Sweden for proceeds estimated at about $1-billion.

“All European countries we operate in have recently implemented sensible measures to greatly restrict travel and human contact. Potential purchasers of this business have been significantly affected, which has had a material impact on the execution of our process,” Inter chief executive officer Christian Bayle said in a statement.

“This is clearly not the right environment to pursue and complete a major pan-European transaction, though we may revisit this process at a later date."

The company had planned to use some of the proceeds to fund the completion of its $3.5-billion Heartland Petrochemical Complex project in Alberta. Now, Mr. Bayle said, Inter is seeking a partner to help finance the project in a process that began in late 2019. “As such, I am pleased to report that we have interested parties; however, the pace of progress will inevitably be slowed by the impacts of COVID-19,” he said.

Last summer, The Globe and Mail reported that CK Infrastructure Holdings Ltd., controlled by Hong Kong billionaire Li Ka-shing, had offered $30 a share for Inter, but was rebuffed. Inter shares hit $7.60 before closing at $7.84 on the Toronto Stock Exchange on Monday.

With reports from Jeffrey Jones, Reuters

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