Evidence of meeting #23 for Natural Resources in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was oil.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • John Quinn  General Manager, Integration and Planning, Refining and Marketing, Suncor Energy Inc.
  • Michael Ervin  Vice-President, Director of Consulting Services, MJ Ervin and Associates, The Kent Group
  • Keith Newman  Director of Research, Communications, Energy and Paperworkers Union of Canada
  • Joseph Gargiso  Administrative Vice-President, Quebec, Communications, Energy and Paperworkers Union of Canada

10:15 a.m.

NDP

Claude Gravelle Nickel Belt, ON

Thank you.

10:15 a.m.

Conservative

The Chair Leon Benoit

Mr. Daniel, you have up to five minutes, please.

10:15 a.m.

Conservative

Joe Daniel Don Valley East, ON

Thank you very much, Chair.

Thank you to the witnesses.

My background is engineering and technology, so this is more to see what your industry has been doing in terms of changing and improving processes for your plants in terms of efficiency, in terms of process, so that you have improved. I mean, you can see what's happening in the computer industry, in the electronics industry. It's been doubling in performance almost every few years.

What has been happening in your industry with regard to refining?

10:20 a.m.

General Manager, Integration and Planning, Refining and Marketing, Suncor Energy Inc.

John Quinn

As I think I said in my remarks, we invest hundreds of millions. You can read it in the public record. It's in our annual reports. In our four refineries, every year we invest roughly $600 million.

That's really just to keep the plants well maintained, reliable, and safe. It's also to ensure that we meet regulatory requirements, that we continue to move forward on some of our environmental commitments with regard to energy efficiency on the sites, and to maintain standards at those sites.

But the biggest investment we've made—we've made two of them in recent years, one at Edmonton and one at Sarnia, in the range of billions of dollars—is to adapt those plants to the changes in crude quality that exist here in Canada coming out of the oil sands. Those are massive investments in metallurgy, in hydrocracking and upgrading of those heavier, denser crudes into the same amounts of gasoline and diesel that we would have made out of lighter, sweeter crudes.

I'm not going to go into the oil sands side of the business. I think most of you may be aware of some of the advances we've made there in tailings technology, etc.

If I have another moment, I'll just mention the very other end of our business, our lubricants business, where we sell 350 specialized products. We do a lot of product development work in that area, with patents out on a variety of different products. We're selling our lubricants, the highest-quality lubricants in the world, in 70 countries now. There has been a lot of research and development work inside that arm of our business, to continue to allow it to be competitive and in fact grow, which it has done quite nicely in recent years.

10:20 a.m.

Conservative

Joe Daniel Don Valley East, ON

Thank you.

Anybody else?

10:20 a.m.

Vice-President, Director of Consulting Services, MJ Ervin and Associates, The Kent Group

Michael Ervin

I'm not sure I have a great deal to add other than the fact that over the course of the past several decades, a lot of the investment going into refineries has been in order to comply with increasingly stringent quality demands imposed on the industry. I would argue that the mandated investment has taken away from the ability of refiners to put more capital into growth investment as opposed to compliance investment.

I think that's the real take-away here. There's a need for continued examination of the impacts of the manufacture and consumption of petroleum products, but those initiatives do come at a cost.

10:20 a.m.

Conservative

Joe Daniel Don Valley East, ON

As a follow-up to that, you obviously see the use of these fossil fuels declining over the next little while as electric technology and some of these other technologies come along for vehicles, do you?

10:20 a.m.

Vice-President, Director of Consulting Services, MJ Ervin and Associates, The Kent Group

Michael Ervin

Yes. Particularly in the case of gasoline in North America, there's widespread belief that this will be the case. Globally, of course, demand for crude oil is forecast to grow, but it's very important to state and understand that refinery capacity has always been built, and for good reason, close to the point of demand as opposed to the point of raw material supply.

10:20 a.m.

General Manager, Integration and Planning, Refining and Marketing, Suncor Energy Inc.

John Quinn

Actually, I want to pick up on that point. I think we touched on it earlier.

It is more difficult to transport refined products across long distances. The amount of handling, product specification, and care and feeding as you go down the supply chain is very critical. It is much easier to move crude oils to where they are needed as opposed to moving refined product. That is the reason why you typically do see refineries built where local demand is. You then have to adapt as you go forward, because demands change and refinery configurations change.

So I really do believe that where refining capacity is needed, it will get built. To try to build it here and move that capacity to where the product demand is would be a very tough challenge and we don't think a very profitable endeavour.

10:20 a.m.

Conservative

The Chair Leon Benoit

Thank you.

Okay, Mr. Gargiso, you can give a short answer.

10:20 a.m.

Administrative Vice-President, Quebec, Communications, Energy and Paperworkers Union of Canada

Joseph Gargiso

I would just like to add one point to that discussion.

With Shell, there were refining facilities. I would point out, by the way, that they are not yet dismantled, but are supposed to be this spring. There was also a level of consumption. There was a balance there. Why was Shell allowed to close? Why was that refinery allowed to shut down, whereas Valero had a refinery in the Delaware Bay that was in the same situation? Valero wanted to shut it down, but the government very actively stepped in. It told the company that if it no longer wanted to be in business, someone else would take over the refinery's operations. So it was sold and is currently in operation.

I am saying that we should adopt a strategy on the basis of similar real-life examples. We have a refinery, but a decision was made to close it. Afterwards, we hear all this talk that it would cost $7 billion to build a new refinery, but we had one. And yet in this same environment that is the North American market, others have not shut down. In this case, the fall guy was us.

10:25 a.m.

Director of Research, Communications, Energy and Paperworkers Union of Canada

Keith Newman

I would add that—

10:25 a.m.

Conservative

The Chair Leon Benoit

Thank you, Mr. Daniel.

Madam Day, you have up to five minutes.

February 2nd, 2012 / 10:25 a.m.

NDP

Anne-Marie Day Charlesbourg—Haute-Saint-Charles, QC

Thank you, Mr. Chair.

I will continue along the same lines since it has to do with economic indicators.

When a company shuts down, GDP drops. In this case, we are talking about a $4-billion drop, not to mention the job losses. In fact, some 38,300 jobs are expected to be lost by 2035. That means an increase in unemployment. What's more, global demand is currently on the rise. Net profits and tax revenues are on the decline because workers no longer pay taxes. And companies no longer pay the royalties. When a business like the Shell refinery closes, the impact is devastating.

In terms of environmental performance, how do Canada's refineries stack up against those of countries such as the U.S., India and China?

10:25 a.m.

Vice-President, Director of Consulting Services, MJ Ervin and Associates, The Kent Group

Michael Ervin

The products that are produced by Canadian and indeed North American refineries have pretty much the highest-quality standards of any products in the world. They are certainly on a par with Europe. If you look at the products sold in other countries, they don't necessarily meet the same specifications in terms of some of those factors that I've already mentioned.

Yes, they are high-quality products, but I will add that many other refineries, being aware of the potential opportunities, are configured to make gasoline of quality that can be and sometimes is sold in North America as well.