The study area is located at the head of Placentia Bay, which is a strategic location and is a natural choice for the feasibility study due to many factors including the presence of skilled local workforce, established ice-free, deepwater shipping lanes, and proximity to both potential oil supplies and large markets for refined products along the east coast of North America and in Euorpe.
The guidance and experience of neighbouring communities has been a critical part of the feasibility study, particularly with regards to site selection and environmental considerations. A series of comprehensive Public Consultation sessions has been ongoing within the neighbouring communities of Placentia Bay over the past several months. Additional meetings are being arranged over the coming weeks and specific opportunities for communication and discussion will be available throughout the study period and EIS process.
This part of Placentia Bay already has significant infrastructure that is an integral part of the petroleum industry of Newfoundland and Labrador. North Atlantic Refining, a subsidiary of Harvest Energy Trust, operates a successful 105,000-barrel per day oil refinery near Come By Chance and Arnold's Cove. Investments of over $550 million have been made in this award-winning facility since 1994. The complex includes one of the largest docks in North America and refines lower cost sour crude oil to produce premium refined petroleum products for markets around the globe.
Nearby is the Whiffen Head transhipment facility, which is owned by a consortium of major oil companies. The facility temporarily stores crude oil from producing fields in offshore Newfoundland and Labrador and makes shipments to oil refineries, primarily throughout eastern North America. The Bull Arm industrial site is located a few kilometres north of the study area. The Hibernia gravity based oil production platform, the largest of its kind in the world was constructed and assembled at Bull Arm, and is now producing in offshore Newfoundland and Labrador. As well, the Marystown shipyard and adjacent Cow Head fabrication facilities located in western Placentia Bay continues to be an active service and supply centre for the province's offshore oil industry.
The province of Newfoundland and Labrador is in many ways an energy province. The energy sector is of vital importance to the economy and contributes approximately 19.6% to the provincial Gross Domestic Product. There are three producing offshore oil fields that represent a significant portion of Canadian conventional oil production and exploration interest is increasing. There are also significant untapped offshore natural gas resources and exploration potential. The provincial government continues to actively promote its highly skilled workforce while encouraging private sector investment in energy-related developments. Significantly, Newfoundland and Labrador is strategically located along the eastern seaboard of North America closest to Europe. This is one of many competitive advantages that underpin the growth of the energy sector of Newfoundland and Labrador.
The feasibility study was done in three stages and evaluated the economic viability of a new oil refinery at the head of Placentia Bay close to existing infrastructure and a world-class workforce. It included a detailed analysis of potential markets for refined products potential supplies of crude oil, refinery layout and engineering requirements.
The feasibility study was conducted by SNC-Lavalin on behalf of NLRC and concluded that a 300,000 barrel per day oil refinery in Placentia Bay would currently cost US$4.6 Billion plus standard owner's costs, and would rank among the largest and most advanced crude oil processing plants in the world. Such a refinery in Placentia Bay appears to be economically feasible with a base-case 15% rate of return indicated based on a number of inputs, including the Company's conservative long-term refining margin outlook.
The three-stage feasibility study was initiated by NLRC in February 2006 and was completed on schedule and slightly under budget.
The initial economic analysis by Cambridge Energy Research in Stage One of the feasibility study indicated that a new oil refinery in Placentia Bay could compete effectively throughout the Atlantic Basin marketplace, based on both the sourcing of heavy sour crude oil feedstocks and maximizing production of transportation fuels, especially ultra low-sulphur diesel and jet fuel, as there are projected shortages for these products in markets in both Europe and North America.
Completion of the preliminary process design basis in Stage Two enabled the start of Design Basis Memorandum (DBM) selection of technology licensors and start of Front End Engineering Design (FEED). This work will be ongoing throughout 2007 concurrent with the environmental assessment process and potential partnership discussions with large heavy oil producers, refinery operators and petroleum product marketing firms. SNC-Lavalin is also providing key inputs and services during this phase of work.
The proposed site for the refinery is Southern Head in Placentia Bay, which is located on the main transatlantic shipping route between North America and Western Europe and is one the deepest ice-free ports in North America, able to accommodate Very Large Crude Carrier (VLCC)-size vessels year-round.
The feasibility study was managed by NorCan Consulting Limited and conducted by SNC-Lavalin on behalf of NLRC. Norcan is a locally based Newfoundland and Labrador company with diverse expertise in petroleum-related disciplines with international experience in engineering, project management and technical development. NorCan has an extensive working knowledge of the oil and gas industry in Newfoundland and Labrador and its global qualifications include project management of construction of the Hibernia oil production platform in Newfoundland and Labrador and project management of an oil refinery expansion in Norway. Norcan continues to lead the management of the proposed project with excellent support from SNC Lavalin's appointed project team.