Scot behind $2bn plan to build Canadian oil refinery

By Julia Fields
Senior Business Writer

 

Scottish mining entrepreneur Harry Dobson has emerged as one of the major players behind a proposal to build a $2 billion (£.1.5bn) oil refinery in Newfoundland on the very tip of eastern Canada.

Newfoundland and Labrador Refining Corporation, which is 20% owned by Dobson, is now carrying out a $7 million (£4.03m) feasibility study into potentially establishing a new oil refinery in the upper Placentia Bay area of the Canadian province.

Other shareholders in the company include Celtic Football Club investor, Dermot Desmond, and British-based private venture capitalist Stephen Posford.

The project is being spearheaded by Canadian firm Altius Resources, which has 37.5% stake in the Corporation. Altius is a major investor in a number of natural resource companies and is currently on a shortlist of candidates to participate in the financing of Newfoundland and Labrador Hydro Limited’s proposed Lower Churchill hydroelectricity project.

Brian Dalton, director of the Corporation, said the provincial government had put forward the idea of expanding refinery capacity to build upon its fast-growing offshore oil industry.

Altius executives “picked up the ball” and floated the concept to Dobson, who in turn brought Desmond and Posford on board to examine the possibility.

The feasibility study, which will take 42 weeks to complete, will analyse product range, potential supplies of crude oil, refinery layout and its engineering requirements. The initial concept envisages a facility with the capacity of about 300,000 barrels a day.

The province currently has only one refinery, which is also located in Placentia Bay. North Atlantic Refining, a subsidiary of Vitol, operates a 105,000-barrel per day oil refinery near Come By Chance and Arnold’s Cove. Investments of over $550 million (£317m) have been made in this 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.

Newfoundland and Labrador Refining Corporation believes the bay is a natural choice for a second facility, given its proximity to both potential oil supplies and large markets for refined products along the east coast of North America.

Dobson, who was born in the Scottish Borders and still has a farm there through a family trust, said: “I’d been looking at Newfoundland and Labrador for quite some time. I think it’s rather uniquely placed from a refinery point of view. There’s exceptionally deep water port facilities. There’s a highly- motivated and skilled workforce. There’s been very high unemployment there for years and the government is very pro-business.

“It’s a unique case where a government is willing to encourage business people . In the US, it is difficult to get permission. I’m not saying that Newfoundland is easy, but they are willing to look with an open mind to business suggestions as long as you work with the government officials and local people.”

Ed Byrne, Newfoundland’s natural resources minister, recently demonstrated his enthusiasm for a project, saying: “Worldwide, oil refining capacity needs expansion, and Newfoundland and Labrador is a prime location for a new refinery. With our province’s oil and gas expertise and growing industry, expanding our refining capabilities will further enhance and strengthen the sector.”

There is no guarantee that the project will go ahead. But Dalton said even if the company decided this autumn to push forward, it would be at least three years before the refinery was operational in a best case scenario.

“The area being looked at is Crown-owned land. Once a site is chosen, we would have to make an application to the province for the site and go through the rigorous environmental studies you would expect.”

The company has already started talks with the mayors and councils of the neighbouring communities and will continue these throughout the feasibility study period.

Dobson said if the numbers prove to make economic sense, the shareholders would raise a mix of equity and debt financing to fund the construction. He refused to comment on how much capital he would personally contribute.

One of Scotland’s richest men, Dobson is known for having a Midas touch.

In 1986, he bought a small company, American Pacific Mining, for £9m with a partner and sold it for £77m three years later. He helped to found Breakwater Resources, the third-largest zinc producer in the Americas.

He also made an estimated £30m profit when he sold his 6% stake in Manchester United to Malcolm Glazer during the team’s controversial takeover. His latest project is Kirkland Lake Gold, a gold mine located in Ontario, Canada. Dobson and other management own 30% in the company, whose shares are traded on Aim.

Dobson currently has no business activities in Scotland.

19 February 2006