Imperial Oil , Canada's largest oil refiner, announced last week that it would convert its refinery in Dartmouth, Nova Scotia, into a terminal facility after the company failed to attract a buyer for the plant.
Imperial, which is 69.6% owned by ExxonMobil , spent the past year exploring alternatives for its Dartmouth refinery, which is the company's least profitable because it is unable to process discounted Canadian crudes available to Imperial's three other refineries and instead has to import more expensive seaborne crude.
Though the Dartmouth refinery had initially generated some interest, a more in-depth analysis of its configuration and size led several would-be buyers to determine that the facility could not be operated profitably due to changing market dynamics.
"The results of the marketing effort illustrate the challenges of operating a refinery of Dartmouth's scale in the competitive conditions of the Atlantic Basin market," said Rich Kruger, Imperial's chairman and CEO, in a statement.
As a result of its decision to convert the facility into a distribution terminal to supply the Atlantic Canadian market,Imperial said it will incur a non-recurring after-tax charge of between $260 million and $280 million, which is expected to be included in its second-quarter financial results.
The Dartmouth refinery has been operating for about 95 years and has throughput capacity of approximately 88,000 barrels per day. It employs roughly 200 employees and 200 contractors. Of the employees, 40% are either eligible for retirement or will receive jobs in the distribution terminal site.
Challenges for Atlantic Basin refiners
Imperial's decision to convert the refinery highlights some of the biggest problems plaguing the Atlantic Basin refining sector - which broadly encompasses refineries in eastern North America, Western Europe, and the Caribbean - such as overcapacity and the high cost of imported crude oil.
Indeed, Dartmouth, which is Nova Scotia's only refinery, is just one of several refineries on both sides of the Atlantic that have been shut down or converted in recent years. For instance, Shell shuttered its Montreal refinery back in 2010 after it failed to attract a buyer.
Similarly, in March of last year, Valero decided to halt operations at its at its 235,000 barrel per day Aruba refinery, which it later sought to convert to a refined products terminal after failing to find a buyer. And earlier this year, Hess pulled the plug on its Port Reading, N.J., refinery due to heavy financial losses in two of the past three years.
If refineries in the Atlantic Basin are to return to profitability, they will need to find a way to access discounted crudes, either from the U.S. mid-continent or from western Canada.
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