Harvest mulls C$2 billion Newfoundland refinery project

Tue Aug 12, 2008 1:35pm EDT
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By Jeffrey Jones

TORONTO (Reuters) - Harvest Energy Trust HTE_u.TO is considering a C$2 billion ($1.9 billion) expansion of its Newfoundland oil refinery, a project that would boost output by 65 percent, the company said.

But Calgary, Alberta-based Harvest stressed on Tuesday it won't go ahead with the major project unless it can attract a partner to share the costs. It has already started a process to find one.

Harvest said SNC-Lavalin (SNC.TO: Quote), the engineering firm it hired to study expansion alternatives for the Come-By-Chance plant, has recommended an increase of production capacity to 190,000 barrels a day from 115,000.

The project would include installing a delayed coking unit, retooling existing gear and adding new equipment to allow the plant to process heavier and more sour grades of crude.

Harvest, which has run Canada's easternmost refinery for nearly two years, described the projected return on such an investment as compelling, despite the hefty price.

In February, it had forecast costs for upgrading the plant at more than C$1 billion. Harvest had also said previously that capacity could be expanded to 155,000 barrels a day or more.

Its next steps before making a go-ahead decision include a more detailed evaluation of the engineering firm's data, a study of financing options and identification of potential partners in the development, it said. That could take about a year.

"We've just initiated a process to go out and respond to people who have proactively approached us over the last couple years as they've became familiar with this opportunity," Harvest Chief Executive John Zahary told analysts.   Continued...