A prominent Canadian economist is raising concerns about the future of Burnaby's Chevron refinery as oil companies try to meet rising demand for Canadian crude in Asia.
Chevron's North Burnaby refinery is one of two remaining in B.C., but it could be in peril if the company can't secure a steady supply of oil.
"It does appear that the Burnaby refinery is not getting adequate feedstock. That's because oil companies can get higher prices in Asian markets," said Robyn Allan, former CEO of the Insurance Corporation of B.C. "This situation actually goes against the announced policy of Prime Minister Harper in 2008. He stated he would not allow raw oil resources to be shipped to Asia because they have lower environmental standards and because he said it would mean a loss of jobs."
The comments Allan is referring to were reported in a 2008 Calgary Herald story, stating that Harper said a "re-elected Conservative government would prohibit bitumen exports to countries that don't have emission reduction targets equivalent to Canada's."
Former environment minister Jim Prentice later clarified.
"Our policy is not to prohibit bitumen exports to China. Rather, we've said that we don't want to see carbon leakage, we don't want to see a loss of Canadian jobs."
Chevron gets its oil supply from Kinder Morgan's Trans Mountain pipeline, which runs oil from Alberta to Burnaby. It's currently the only pipeline from Alberta to the West Coast, although Enbridge has proposed to build the Northern Gateway pipeline to Kitimat. Kinder Morgan may apply to the National Energy Board to twin the Trans Mountain pipeline, provided there are enough long-term binding contracts from customers to support the expansion.
According to Allan, Chevron's predicament is a microcosm of a bigger problem as oil companies ship more overseas instead of supplying Canadian markets.
"If we continue to build pipelines to ship the raw crude, we will not have any opportunity to get value added from these resources," she said. "We need a policy that says we feed refineries first before we feed Asian refineries."
According to Allan, if Canada keeps shipping raw crude overseas, our refineries will shut down and oil prices will rise.
"It's a very gradual process, but it leads to the same end-game, where the next step is to say: now we can't afford any oil because they are willing to pay so much in Asia, so we're going to have to close the plant down. ... This is a process, that over five to 10 years, leads to refineries being shut down all over Canada," she said. "You think we pay high prices now? You just wait, because those prices are going to go up so high for Canadians if we can't refine our own products."
According to Allan, if Canada loses high-skilled, well-paid refinery jobs, the economy suffers.
"If people don't work, they don't have incomes, and if they don't have jobs, they can't demand goods and services, so the rest of the economy suffers," she said.
Allan's comments come on the heels of concerns raised by the Communications, Energy and Paperworkers' Union of Canada, which represents refinery workers across Canada, including those at Burnaby's Chevron refinery.
"It's our understanding as of March 1, the Chevron refinery in Burnaby will lose access to 20,000 barrels per day of bitumen resulting in production curtailments due to Kinder Morgan's sale of bitumen to China," the union said in a statement sent to the NOW. "CEP is very concerned about the potential loss of good-paying family-supporting jobs in the community. There are about 400 jobs locally in Chevron's operations that depend on this refinery."
Chevron seems to be having a tough time securing enough oil due to increasing demand in Asia and may need to scale back its operations as a result.
Kinder Morgan spokesperson Lexa Hobenshield said for every 10 tankers, one is going to Asia (predominantly to China) and nine are going to the U.S., but that could change as Kinder Morgan responds to pressure from the market.
The company doesn't own or sell the oil but collects fees for transporting it. Kinder Morgan also uses an allocation process that's regulated by the National Energy Board to determine who gets what share of the pipeline's oil shipments. Those guidelines, approved by the National Energy Board, are what Allan said the government can use to guarantee Canadian refineries stay in business.
