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The LyondellBasell refinery in Houston. (LyondellBasell)
The LyondellBasell refinery in Houston. (LyondellBasell)

At North America’s refining hub, a thirst for Keystone Add to ...

The cherry-red crane looms emphatically over the grey industrial landscape of the Houston shipping channel where a refinery processes crude oil into gasoline, diesel and other petroleum products.

Dutch-owned LyondellBasell NV is using the behemoth – billed as the second-largest crane in the world at 175 metres tall – in the overhaul of one of its two cokers, a refinery unit that is critical for the processing of heavy crude like Alberta’s oil sands bitumen.

Crane operators moved towering derricks off the coker so workers could replace four aging, 360,000-kilogram drums and carry out inspections and maintenance to get the unit ready for a tidal wave of diluted bitumen that is expected to reach the Gulf Coast from Canada’s oil sands in a few short years, assuming proposed pipelines get built.

The 268,000-barrel-a-day Lyondell plant is one of some 50 refineries that dot the Texas and Louisiana coasts, the largest refining hub in the world. The industry here is rapidly transforming from being dependent on imported crude and challenged by foreign refiners to becoming a world-beater that processes mainly North American crude – a trend that supports employment in the oil fields, the pipeline sector and the refineries themselves.

To further reduce their reliance on higher-priced offshore crude and enhance their competitiveness, Gulf Coast refiners such as Lyondell that specialize in processing heavy crude are keen to get access to cheaper supply from Canada. And that means more oil coming through new projects like TransCanada Corp.’s Keystone XL pipeline.

“It’s really important for the American worker that the [crude] costs come down, whether it’s Canadian or domestic crude or whatever,” Kevin Brown, senior vice-president for refining at Lyondell, said in an interview at the plant after a recent visit by Natural Resources Minister Joe Oliver. “When you think that refineries were going to close a few years ago and now we’ve got a feedstock advantage, if that advantage carries through, refineries around the Gulf Coast have the ability to export and protect jobs.”

But the Keystone project, and indeed the future of the Gulf refining industry itself, is being bitterly contested now. Environmental advocates have been warning for ages that North America must wean itself off oil – and particularly the carbon-intensive bitumen from the oil sands – in order to head off catastrophic climate change. But the debate has taken a new turn, one that sees the pipeline’s opponents seizing on another point. They argue that the economic benefits to the U.S. are minimal and the torrent of new Canadian oil won’t do much to help America’s energy security, since some portion of that new fuel will simply wind up on ships, bound for overseas markets.

The pipeline question has divided Democrats and Republicans in Washington, and this week Nancy Pelosi, one of Washington’s leading Democrats, echoed the environmentalists’ opposition, dismissing as “amazing” the claims that Keystone will bring tens of thousands of new jobs and greater energy security. “The oil is for export and the jobs are nowhere near that,” she said in a press briefing after her meeting with New Democratic Party Leader Thomas Mulcair, who attacked the Conservative government’s environmental record without directly opposing Keystone.

Conservative ministers – including Foreign Minister John Baird, Trade Minister Ed Fast, and Mr. Oliver – have flocked to the U.S. in recent weeks to lobby for the Keystone project, while President Barack Obama continues to weigh the decision, which is not expected before this summer.

In the cross-hairs of the debate is the Gulf Coast refining sector, as old as the automobile era itself, where people are eager to tell you that the facts belie the argument that Ms. Pelosi just made.

The lure of Lyondell

The Lyondell refinery has seen a century of ebbs and flows in the Texas energy story. The plant opened in 1918 under the Sinclair Oil banner and was later owned by Atlantic Richfield, which became Arco. It survived dramatic changes in the industry, relying first on conventional Texas light oil for feedstock. As that production began to wane, it turned in the 1990s to Latin American suppliers of heavy oil that needs extra processing. Now, it is looking to take advantage of the boom in North American supply, whether from the new light oil fields in North Dakota’s Bakken and Texas’s Eagle Ford, or from the expected tripling of production in the oil sands.

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