By The Canadian Press
09 Feb 2006 at 04:53 PM EST

ST. JOHN'S, N.L. (CP) -- A new company is looking at the idea of building an oil refinery at Placentia Bay in southeast Newfoundland. Newfoundland and Labrador Refining Corp., 37.5% owned by Altius Minerals Corp. of St. John's [TSXv:ALS], expects to spend C$7 million on a 42-week feasibility study.

  
The development ''is timely because of limited oil refining capacity worldwide and strong market demand for refined petroleum products,'' the new company stated Thursday. It also noted that the provincial government is encouraging the development of new refining capacity.

Premier Danny Williams said the government is ''very excited with this feasibility study which has tremendous economic implications for the province.''  He added that the original intention would be to process crude oil from Canadian offshore rigs, but the study could find that oil from elsewhere would be ''viable and profitable, because there is a need for more refining capacity - there's no doubt about that.''

 

A new refinery on Placentia Bay would neighbour Newfoundland's lone refinery, the North Atlantic Refining complex at Come by Chance, built in the mid-1970s and quickly closed with the loss of tens of millions of dollars of taxpayer money in a C$500-million bankruptcy.

 

It re-opened in the mid-1980s and has been owned since 1994 by Vitol of Switzerland. Employing 700 people, it can process 105,000 barrels of oil per day, all carried from abroad in supertankers. Most of its refined products are sold in the northeastern United States, and Vitol indicated in December that the facility is for sale.

Brian Dalton, president of Altius, said his group started its process last June and ''we talked to the owners of North Atlantic this morning and told them what we're doing, as a courtesy.'' He added that ''it's very early in the game; right now we're focused on our own stand-alone opportunity.'' Williams said the existing Come by Chance refinery has become ''very successful, it is a good employer, but it is processing a different high-sulphur-content oil that's coming from overseas, as opposed to off our shores.'' He added that ''there's been absolutely no discussion whatsoever of public financial involvement at this stage'' in a second refinery. Altius president Dalton said the refinery's business plan would have to be global, as ''most refineries have lives that are much longer than any oilfield,'' and the North American energy market is fully integrated.

The initial concept for the new refinery foresees capacity of 300,000 barrels per day. Newfoundland and Labrador Refining sees Placentia Bay as a strategic location thanks to a skilled workforce, ice-free deepwater shipping lanes and proximity to offshore crude oil and large markets along the east coast of North America.

Altius, which has a stock-market value of about C$144 million, has a royalty interest in the Voisey's Bay nickel district in Labrador along with other mineral assets. In addition to Altius, the refinery partners are Harry Dobson, a Scottish-born financier with interests in natural resources and real estate including Rambler Metals and Mining PLC, 30% owned by Altius; Dermot Desmond, founder of International Investment and Underwriting in Dublin; and Stephen Posford, an English venture capitalist.

The three-stage feasibility study, managed by NorCan Consulting Ltd., will involve analysis of the appropriate refined products, potential supplies of crude oil, and the refinery's layout and engineering requirements.

© The Canadian Press 2006