Irving Oil is looking to bring more Western Canadian crude into its refinery in Saint John, New Brunswick, to help deal with supply chain issues arising from the COVID-19 pandemic.
According to a CTV News report, the company has applied to Canadian Transportation Agency to use foreign oil tankers to bring crude in from the West Coast, down to the Panama Canal, and then to Saint John. It’s also looking for permission to bring tankers in from terminals on the U.S. Gulf Coast, and then to the Bay of Fundy, and from suppliers in Newfoundland and Labrador.
Irving says it is looking to increase the use of domestic oil, and Canadian-owned tankers are not currently available, according to the report.
The company is applying to use the tankers starting this month and over the next year until April 2021.
“As a Canadian company who owns and operates Canada’s largest oil refinery, Irving oil should have access to Canadian crude oil from both offshore Newfoundland and Western Canada,” the company said in a letter to the CTA. “It is critical to our customers, to our business, and to energy security throughout Atlantic Canada that we are able to use foreign crude oil tankers.”
Global oil prices have plunged over the past two months and remain volatile due to demand destruction from measures to fight the COVID-19 pandemic, as well as lingering effects of a market share battle between Russia and Saudi Arabia.
On Tuesday, Desjardins Energy Research cut its West Texas Intermediate crude oil price forecast to US$32.50 per barrel this year (from US$40) and to US$40 per barrel in 2021 (from US$45). It expects Brent oil prices to average US$37.50 this year and $45 in 2021.
Fears that crude oil prices slammed by a global economic "train wreck" will remain low for some time are forcing Calgary-based companies to write off billions of dollars in value from their oil and gas resources.
Husky Energy Inc. announced a $1.7-billion first quarter loss on Wednesday, including impairments of $1.1 billion after tax due to lower crude oil price assumptions plus an inventory writedown of $274 million.
Fellow oilsands producer Cenovus Energy Inc. reported a $1.8-billion loss including impairment charges of $335 million in its upstream business due to low oil prices and $253 million from inventory.
On Tuesday, Vermilion Energy Inc. reported a $1.3-billion loss after taking a $1.2-billion writedown in the value of its oil and gas assets in Canada and internationally.
Husky estimated it needs Brent oil prices in the mid-US$30s to break even on its oil production, while Cenovus said its break-even WTI number is about US$38 per barrel.
Fears that North American crude storage was nearing its limit were blamed earlier this month for the first-ever negative WTI close — which means contract holders were paying buyers to take their oil.
Premier Jason Kenney says a global oil glut means Alberta's main industry will be dealing with low prices for a year or longer after the COVID-19 crisis abates.
"Our best intelligence is that those extremely depressed prices are likely to continue for the better part of a year at least given global inventories," Kenney said Wednesday.
He said supply is so high, holding tanks are at the brim and tankers on the U.S. Gulf Coast can't unload.
West Texas Intermediate, the benchmark price for North American oil, is hovering around $US15 a barrel, while Alberta had banked on it being US$58 a barrel this fiscal year.
The province, with an economy heavily dependent on oil and gas, has been hit hard. Its budget deficit was expected to be $7 billion before the novel coronavirus spread worldwide. Kenney has said it is now likely to be closer to $20 billion.
The federal government offered help to the industry on April 17. Prime Minister Justin Trudeau said his government would spend $1.7 billion in Alberta, Saskatchewan and British Columbia to clean up inactive and "orphan wells'' — oil and gas wells that have been abandoned by their often-bankrupt owners without being remediated.
Another $750 million to help cut emissions of methane, a potent greenhouse gas that leaks from energy facilities, was also promised.
The cash is expected to support 10,000 jobs across the country.
— with files from CTV News, The Canadian Press
Email Managing Editor Matt Preprost at email@example.com.