Industry Committee on July 20th, 2010

[Richard Oblath]

Mr. Chair, the fact is this is not--

[Yvon Godin, NDP, Acadie—Bathurst, NB]

No, no. Excuse me, Mr. Chair. These are my questions and the answers to my questions. This is my time.

[The Chair, Conservative, Michael Chong]

I understand, but as chair, I'd like the witness to finish his sentence and then you can ask a question.

Go ahead, Mr. Oblath.

[Richard Oblath]

Mr. Chair, this is not only our own analysis, but a lot of other companies have looked at this, including... Someone characterized Delek as not a credible owner. I did not do that. They are a credible refiner. They are a refiner themselves. They and other credible refiners have looked at this and made the same decision that we have.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Oblath.

Mr. Godin, you can ask one last question.

[Yvon Godin, NDP, Acadie—Bathurst, NB]

Mr. Rocheleau, do you agree with them when they say that the Montreal refinery is no longer profitable and that it is time to walk away?

[Jean-Claude Rocheleau]

No, not at all. As I have said, the refinery is viable. It has made money and it has a market. What Shell has done is to take our money, the profits that we have made at the Montreal East refinery for years, and put it into facilities in the tar sands, into building the Scotford refinery. That is where our money and our profits have been going for years. Montreal has suffered from a lack of investment for some time, because its profits went to build what they needed in the west.

This refinery is as competitive as any other in Montreal. The problem is that Shell has waited so long to do any maintenance work that we are now up against a wall. No maintenance has been done as required since the beginning of 2009. Shutdowns were postponed from the spring of 2009 to the fall of 2009, and then from the fall of 2009 to the spring of 2010. Now, with none of the required work done, we are presented with a fait accompli, that the refinery will now be closed in September.

That does not make it a refinery that can no longer operate and make a profit. In fact, in the first quarters of 2010, the profits from the Montreal East refinery now place it in the top 25% of Shell's refineries.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Rocheleau and Mr. Godin.

Mr. Allen.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you very much, Mr. Chair.

Thank you to our witnesses and all the other interested stakeholders who are here today.

I just want to pick up on one thing you said, Mr. Oblath. You talked about a significant investment in Texas and other facilities. What differentiates those facilities in those locations, as opposed to the Montreal East refinery, from an investment standpoint? Is it age of facility, or what is it?

[Richard Oblath]

A huge number of factors--not necessarily age, but size. The Port Arthur refinery in Texas will become one of the two largest refineries in the whole of North America, Canada and the United States.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

What is the size of the investment you're putting into Port Arthur?

[Richard Oblath]

I don't know the exact number, but it's billions of dollars.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Billions?

[Richard Oblath]

Yes.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Okay.

I just want to pick up a clarification on the timeline that you've put out here. You've talked about September 13 and the last shipment sometime in August. So if I understand correctly from the previous questions, if there were an offer made, it would have to be within the next two weeks, basically. Is that right?

[Richard Oblath]

In our discussions—and the discussions based on expressions of interest went the furthest with Delek, and this was on June 21--both parties set ourselves a timeline that should we come to an agreement we needed to do so by July 23. That was a target we set during that meeting. That would have been a full contractual agreement for them to buy and us to sell the refinery plus the businesses they wished to also have. It doesn't mean that ownership would have changed, then, because there are various regulatory issues and other issues you have to go through between signing and closing a deal. We are clearly running out of time to do any transaction.

Mr. Chair, again I remind you we planned on this back in July last year. We were hoping to have sold the refinery or at least be under contract to sell it by the end of 2009. We told the special committee that we would be willing to work with them, but we gave a deadline of June 1. It's now getting in towards the end of July. Our choices are running out.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

The next question is on the value of the site. You talked about the value of the site in Montreal East. It seems to me that you've actually said in your statement that a delay in permitting can cause supply disruptions and there are normal permit requests. Is there a better permit process, or what is the length of the permit process for this as a brownfield site? It would have value, I assume, as a site where you're already working, as opposed to permitting a new site. How quickly do you believe you can get the permits?

I guess my next question about that is from the conversion to the terminal. Mr. Godin started to get on this. Do you have an estimate? Presumably you must have said something to your shareholders about what it would cost for just the capital cost to convert to a terminal. Can you share that value?

[Richard Oblath]

Monsieur Houle.

[Christian Houle]

The first question you have is about permitting?

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

First was on the permitting.

[Christian Houle]

There's no one answer; it's a matrix of different bodies of government--Quebec, Ville de Montréal. Different people need different permits. We need permits, for example, to put in a new pumping station, an electrical substation. I need a permit to change the service of the tanks in the refinery. I need a permit for demolition. The current injunction, for example... The judgment has been made, and we respect that and we're going to follow the law and the judge's decision. The consequence of that is that it's preventing our doing other work that people are scared to do in the refinery. That will cause an impact on the project side, which could delay the readiness, to be ready on November 1. Then the number of ships, the volume--there could be a significant disruption to the market if we don't have those permits of demolition, as an example.

I met with the Ministry of Natural Resources on Friday. I gave them the supply plan, the detailed one. They had a few questions. As long as they give me that permit by the end of the month, for example, we're as per the schedule and we'll meet the timeline. If for different reasons—and I'm not an expert in the world of politics or things like that—it starts to be delayed, there will be disruptions in the supply.

[The Chair, Conservative, Michael Chong]

The second part of the question was on.

the cost of remediating or converting to a terminal.

[Christian Houle]

Yes, and I will be forced to probably say the same answer, that the information is considered sensitive competitive information, so I cannot disclose. I can only say the big-ticket items of this conversion, the soil remediation project, severance packages, all those things from the total we have considered in the final decision, but I cannot go into the detail of each of these components.

[The Chair, Conservative, Michael Chong]

Thank you very much.

Mr. Allen, is that satisfactory to you? Are you satisfied?

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Can I follow up just real quick on one point?