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 refineries.

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

February 2nd, 2012 / 9:55 a.m.

Conservative

David Anderson Cypress Hills—Grasslands, SK

Thank you.

Well, I am going to follow up with just one question on that. You would say, then, that Canada does have a secure supply of energy. Or would you say that?

9:55 a.m.

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

John Quinn

Yes, absolutely.

9:55 a.m.

Conservative

David Anderson Cypress Hills—Grasslands, SK

Okay. Our other witnesses did not seem to be saying that.

I want to follow up on something Mr. Ervin said.

You talked about the super refineries being built in India. I think you said something to the effect that they can refine to gasoline standards and could possibly ship that around the world. Is that a fair statement?

9:55 a.m.

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

Michael Ervin

Yes, indeed.

9:55 a.m.

Conservative

David Anderson Cypress Hills—Grasslands, SK

What I'm wondering then is why we can't export finished product. We've heard that we're operating at 83%. If we were to go to 100%, why couldn't we be shipping that finished product around the world as well? Is that an issue of price, or what comes into play there?

9:55 a.m.

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

Michael Ervin

It really does come down to price. In the past I would have referred to gasoline and diesel as being regional in terms of market nature, but over the last decade it really has become a global market, much in the same way that crude has always been a global market.

You have to be able to compete on price. For instance, as has been the case for many years, Europe is long on gasoline; they have a surplus of gasoline production. They ship to the United States, and they typically have done that for decades during the high-demand summer periods because the European market would be soft for gasoline and there would already be a demand in North America for that product. So for Canada to export—

9:55 a.m.

Conservative

David Anderson Cypress Hills—Grasslands, SK

Are we incapable of doing that or is the demand not there at the present time?

9:55 a.m.

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

Michael Ervin

Certainly the capacity of refineries in North America was not sufficient to export until 2008. As some testimony here has illuminated, the U.S. has become an exporter of petroleum products as a result of that excess capacity.

The fact is that with low crack spreads that excess capacity is going to dry up. The low crack spreads will simply not sustain some of the smaller, less efficient refineries. That will shrink capacity over time down to a sustainable level, so the export opportunity with it will decline as well.

9:55 a.m.

Conservative

David Anderson Cypress Hills—Grasslands, SK

My question is why is it there for India and not for us? It seems that we—

9:55 a.m.

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

John Quinn

Let me try to take a slightly different approach to that. In India you can build a million-barrel-a-day refinery, which they're doing today. They have a local market that supports that refinery. There are profits from that local market—it's close by. So they build the profitability base in that plant off their local market. They'll scale that plant to their local market.

They can take an increment of a million-barrel-a-day plant, with the economies of scale that go along with that. In a region that has warm weather operations there is a lower cost of operation at that facility, and I'm sure there are lower wage rates in those plants and that it is generally an easier regulatory environment. Although they could tailor a product for Canada and North America, all the product they're making isn't necessarily to that standard.

Those things in combination allow them to carve out a portion of that refinery or take an incremental expansion that they can move a lot more cheaply to market. Frankly, they can take a little bit less profit on that piece but still some profit.

10 a.m.

Conservative

David Anderson Cypress Hills—Grasslands, SK

Even though we already have—

10 a.m.

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

John Quinn

We don't have the local market.

10 a.m.

Conservative

David Anderson Cypress Hills—Grasslands, SK

Even though we already have the infrastructure in place?

10 a.m.

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

John Quinn

Well, we wouldn't have infrastructure in place for a million-barrel-a-day refinery, that's for sure.

10 a.m.

Conservative

David Anderson Cypress Hills—Grasslands, SK

But we do now for a 15% capacity of.... Anyway, I'll move on to something else.

I was interested when you said there is a long-term prediction of reduction in gasoline demand. Have those predictions been accurate, the predictions that were made for five and ten years hence? Have you been able to predict the future accurately in the past? Leading from that I'm going to talk a little bit about the future, but were the predictions that were made a few years ago accurate?