Exclusive: Canada's far east refinery swaps Iraqi crude for U.S. shale

Tue Nov 4, 2014 2:48pm EST
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By Jarrett Renshaw

NEW YORK (Reuters) - Canada's Come by Chance refinery, on the far eastern tip of the country, has swapped out its mainstay Iraqi crude to run almost wholly on U.S. shale oil, industry sources say, the latest sign of how the shale boom is redrawing global oil trade.

Some two months after South Korea's national energy firm agreed to sell the refinery to a newly formed New York-based commodities group, the 115,000-barrel-per-day (bpd) plant in Newfoundland has already begun making significant changes in its crude oil diet, according to two sources familiar with its operations, who spoke on condition of anonymity.

Today, the facility is running mainly on crude oil being shipped out of Texas, according to the sources as well as shipping data compiled by Thomson Reuters. That is a big switch from the first nine months of the year, when over 70 percent of its feedstock was coming from Iraq, data show.

The switch at Come by Chance - a town named for its remoteness on the island of Newfoundland - is the most dramatic sign yet of how a growing bounty of light, sweet U.S. shale oil is displacing other producers in refineries worldwide.

While rapidly rising North American production has already squeezed out imports across most of the U.S. Gulf and East coasts, and some of Canada, the Come by Chance refinery is the furthest-flung plant to make such a major switch, suggesting that cheaper domestic prices are compensating for higher freight costs.

The big shift in feedstock from generally sour Iraqi crude to light, sweet U.s. shale has not been entirely trouble-free, however. In the past few weeks, the facility has been running at anywhere between 90,000 and 105,000-bpd as it adjusts to the new slate, one of the sources said. Both of the sources said it was currently running at about 105,000 bpd, still below capacity.

Asked to confirm the switch from Iraqi crude oil to U.S. crudes at the Canadian refinery, a spokesman for the Korean National Oil Company, South Korea's state-run oil company, said the incoming owners are now making those decisions. He said the deal was expected to close in November.

The new owners, SilverRange Financial Partners, a little known merchant bank run by two former senior Wall Street oil traders, also declined to comment, citing the pending sale.   Continued...