Irving Oil and BP PLC are scrapping plans for a multibillion-dollar second refinery in Saint John, dealing a blow to plans for an energy hub on the east coast.
The project had been estimated at about $7-billion, and was to form the core of a hub that would serve eastern Canada and the U.S. northeast.
"The joint technical and commercial feasibility study that the two companies have been conducting over the last 18 months concluded that the project was not viable at a time of global economic recession and dampening forecasts for petroleum product demand in North America," the companies said in a statement.
The cancellation deals a major blow to New Brunswick's vision of a building a major energy hub in the Saint John area to serve Eastern Canada and the U.S. Northeast. The new initiatives would have been anchored by the expanded Irving refinery capacity, which would have doubled in size what is already the largest refinery in the country at 300,000 barrels a day.
The refinery expansion would have contributed about $7-billion of the $15-billion to $20-billion in new capital investment touted for the region.
The hub idea, heavily endorsed by Irving Oil and the provincial government, is to use Saint John's location and deep harbours to become a key delivery and transmission point for the U.S. Northeast. The first stage is a new $1-billion Canaport liquefied natural gas terminal east of Saint John, which is a joint venture between Irving Oil with Repsol SA of Spain. The terminal started receiving tankers last month. The initiative includes a new natural gas pipeline link to the U.S.
In addition, a retrofit of NB Power's nuclear power plant at Point Lepreau just west of Saint John is under way, and a decision still has to be made on a potential second reactor. The Irvings also have indicated their interest in an integrated power transmission line to feed electricity into the northeastern United States.
Much was riding on these proposals because of Saint John's recent history of economic decline, given the loss of a sugar refinery, of ship-building operations, and the difficulties facing the provincial forestry industry.
Iain Conn, chief executive of BP's refining and marketing business, said it became clear, particularly over the past year, that market conditions for refining had changed since the two companies struck their original agreement.
The refinery project was already on a slow track. Late last year, Irving changed the project's timing to a maximum eight years from three or four.
At the time, the company said it was concerned about labour shortages, financing costs and the economic slump.
The huge refinery, to be built just outside Saint John, was to eventually process 300,000 barrels of oil a day, making diesel for U.S. and Canadian markets.
At its peak, the project was expected to create several thousand construction jobs.
With files from The Canadian PressReport Typo/Error