Natural Resources Committee on Jan. 31st, 2012

[The Chair, Conservative, Leon Benoit]

We are actually out of time for Madam Day.

Go ahead, Mr. Lapointe.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

May I ask for 30 seconds more for my colleague? She had to repeat the question because of problems with the translation. I think it's not fair—

[The Chair, Conservative, Leon Benoit]

She has had 45 seconds extra already, so the time is up.

Before we get to the budget, we will go finally to Mr. Allen. You have perhaps three or four minutes, Mr. Allen.

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

Thank you very much, Mr. Chair.

Mr. Boag, I wanted to pick up on one of the things you commented on, the seasonality factor. It was brought out first in Mr. Corey's presentation when he dealt with fuel specifications and seasonality, and you've spoken about it as well.

When you look at the seasonality factors in Canada and potentially the number of different products that we would have in Canada based on that factor, first of all, how does seasonality change the refinery setup and configuration, or does it? Second, how many fuel specs do we have, and how often do they actually change?

[Carol Montreuil]

The best example is what we call vapour pressure. For your car to start, you need some vapour to start the ignition. As the weather gets colder, it's more difficult to have this vapour. The best example of vapour pressure is summer and winter conditions. You have to prepare what we call the base stock gasoline in the refinery with different components so that the vapour pressure meets the Canadian specs. Then your car will start and won't stop on the side of the road. That's one example.

Biofuel composition is another example. Adding more biofuels in a season might mean that the base stock that you prepare before you blend the biofuels would have to be of a different quality, depending on the weather conditions.

Those are two examples—vapour pressure, and the addition of biofuels that would require a different base stock product at different times during the year before it's blended in.

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

Okay, you have your different base stock product, but does that need a separate configuration? Do you have to reset your—

[Peter Boag]

It means you may be using different process units more often or less often within the refinery. More of your feedstock might be going through a certain process unit at a particular time because of seasonality issues than might be going through that process unit at some other time of the year. There are process units and there is impact on feedstocks to be considered.

There are significant operational changes within the refinery to meet the seasonality requirements of both gasoline and diesel. They can be quite significant. As well, there are multiple changes throughout the year, depending upon the geographic region and the prevailing climatic conditions. Largely it's ultimately climatic conditions, seasonal differences in climate, and seasonal differences in weather that cause significant changes to the recipe, if you will, for gasoline and diesel, depending on those seasonal changes. It involves different uses of different process units and using them more or using them less at any given time in the year.

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

You also commented about different refineries. You said that when refineries are built, they could be very different depending on the target market and that type of thing. Does that make it more complex? In the India example, potentially 40% of their production may be imported into North America. How is that refinery being set up?

[Peter Boag]

It has implications for that.

The other part we haven't talked about in terms of the product side is of course the crude slate. We often want to talk about crude as a single type of product. Well, there are multiple different types of crude in terms of their weight, their heaviness, their sulphur content. So refineries are also configured generally to refine a specific type of crude. That is one of the economic challenges of balancing. What I would call heavier, more sour crudes are generally less expensive on the market. So you can get your feed stock at a lower cost, but in order to make that into the product mix you need to make, you need to have a more complex refinery, and your refining costs are higher. It's always that delicate balance of feedstock, refinery configuration, and managing costs. Then you have to match those with the demand profile, whether it emphasizes diesel, aviation fuel, or crude. Then you have to meet all of those aspects around seasonality.

So when Mr. Corey defined a very simplified refinery, that really masked much of the complexity that's involved in the refining business that relates to crude, processes, and ultimately final products, bearing in mind the seasonality issue.

[The Chair, Conservative, Leon Benoit]

Thank you very much.

Thank you, Mr. Allen.

If the witnesses could just stay in their seats for about a minute or two, so that if any members of the committee would like to chat with them they could, that would be great.

Committee members, could we just look at the budget? You have it in front of you. It's a budget just to cover costs for witnesses to come to this study. I would like to get approval for the budget if I could.

Are there any questions or comments on the budget? Then can the budget be approved as presented in the document from the clerk?

[Some hon. members]

Agreed.

[The Chair, Conservative, Leon Benoit]

It's approved.

Thank you very much.

The meeting is adjourned.