Maintaining a strong Canadian refining sector

May 14, 2015   | Categories: Economy, Energy, Policy, Refineries
Refining oil into transportation fuels is a crucial part of our economy. Canadian refiners produce nearly 40 billion litres of gasoline and 28 billion litres of diesel fuel annually  – fuels that move people and products across the country.

We shared in previous blogs how refineries are striving to create cleaner fuels, and how they are reducing GHG emissions. This week, we sat down with Brian Ahearn, Canadian Fuels vice-president for Western Canada, for a look at the importance of keeping Canadian refiners globally competitive, and the challenges they face.

According to Ahearn, refining has become a very competitive and increasingly global industry.

There is plenty of excess refining capacity in the world, with increasing competition especially for Eastern Canadian refiners, he said.

“Our challenge is to provide Canadians with a reliable supply of dependable, fit-for-purpose, competitively-priced fuels that are essential to a strong Canadian economy.”

He also said it’s crucial for Canada to maintain a competitive refining industry, because petroleum fuels will remain our dominant form of transportation energy for a long time to come.

“Refining also makes a significant economic contribution to local communities and to Canada as a whole.”

Key elements of a strong refining sector

Canada is self-sufficient in crude and refined products, and is a net exporter of fuels, said Ahearn.

Despite Canada’s strength in petroleum fuels, there are always new challenges to remaining competitive in a market that it increasingly global. Ahearn said that competitiveness is influenced by a complex set of factors including:
  •     crude oil type
  •     product range
  •     refinery size and configuration
  •     operational efficiency
  •     regulatory requirements.
Underpinning this are changing supply and demand dynamics at the local, regional and global level.

Flagging demand & excess capacity are posing challenges

Declining demand and excess refining capacity are creating challenging market conditions for refiners in Canada.

North American demand for petroleum transportation fuels is no longer growing and will slowly decline in the coming years, as it is in virtually all of the developed world, said Ahearn. Improvements in vehicle fuel efficiency and growing use of alternate fuels are the main reasons.

At the same time, Canada is increasingly exposed to fuel supply from large refineries along the U.S. Gulf Coast, and huge new refineries in the developing world, where fuel demand is growing.

“With their significant scale advantage, excess capacity and tidewater access, these large refineries are well positioned to export fuel into the Canadian market.”

Maintaining Canadian refinery competitiveness

Ahearn said Canadian refiners are keenly focused on maintaining their competitiveness by optimizing the type of crude they refine and products they produce, and carefully managing their energy requirements, plant complexity and efficiency, and logistics and transportation networks, all the while responding to an increasingly stringent regulatory agenda.

He added that policy makers, too, have a role to play in maintaining Canadian refiners’ competitiveness.

“Regulatory requirements need to be based on solid data and backed by rigorous cost-benefit analysis. Regulations should be ‘outcome based’ to give refiners the ability to find the most cost-effective compliance approaches. And, they need to be aligned across jurisdictions, especially between Canada and the U.S., to ensure regulatory compliance cost burdens are comparable.”

“Government and industry must work together to create a regulatory environment that keeps Canadian refiners competitive and in the game,” he said.
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