QUESTION: Mr. Armstrong, thanks very a lot for that world overview of the vitality market in your non-public weblog. You’ve linked the dots in a approach nobody else appears to, simply as you talked about at your Tampa convention. I additionally appreciated your distinction between Japanese and Western Canada, may you elaborate on {that a} bit additional?
And thanks once more. My kids’s eyes have been actually opened by your insights.
FG
ANSWER: A refinery isn’t a one-size-fits-all machine. It’s a complicated industrial facility designed to course of a selected sort of crude oil effectively. Therefore, many refineries in Japanese Canada are configured to run on the lighter, sweeter crude oil sometimes imported from locations like Saudi Arabia and Nigeria, reasonably than the heavier oil from Alberta’s oil sands or Texas. Subsequently, refineries are designed for various grades of crude oil.
This introduces one other dimension to the vitality disaster. Additionally turn into of laws in some provinces, pipelines have been blocked. Pipelines primarily transfer oil from Alberta to the U.S. and to British Columbia. There isn’t any direct pipeline connection from Alberta to the Atlantic coast. With out this pipeline entry, Japanese refineries depend on tankers for his or her crude provide. It has been merely extra economical for them to import mild crude from the Center East that assemble pipelines. Thus, Irving Oil’s massive refinery in Saint John, New Brunswick, imports just about all of its crude by tanker.
This vitality disaster has one other dimension whereas you merely can’t substitute crude oil that’s heavy when the refinery can solely deal with mild crude.
