NEW YORK (Reuters) - NARL Refining notified employees Wednesday of plans to shed up to 130 jobs at its Come By Chance refinery in Newfoundland, Canada, sources said, the latest refiner along the Atlantic Coast to undergo painful belt-tightening amid weak margins.
The cuts revive an uncomfortable question for the remaining refineries along the U.S. and Canadian Atlantic Coast: will they all survive the current market downturn?
“They remain the most vulnerable,” said Sarah Emerson, a managing principal at ESAI Energy LLC. “The real question is who closes first and why?”
The bulk of the job cuts at the Canadian refinery, about 100, will come from union ranks, according to two sources familiar with the plant’s operations. The losses represent about one-third of the plant’s union labor.
“This decision was very difficult but necessary to secure the refinery’s future,” the company said in a statement. “We understand the impact this will have on people and their families and we have put a number of resources in place to provide support during this time.”
The company blamed the layoffs on weak margins and high regulatory costs, the sources said. Philadelphia Energy Solutions (PES), the largest U.S. East Coast refiner, also blamed margins and regulatory costs for layoffs and benefit cuts in September.
U.S. independent refiners such as Valero Energy Corp VLO.N and Phillips 66 PSX.N are on track for their worst year since the U.S. shale boom began in 2011. Even in high times, refiners along the Atlantic typically operate under slimmer margins versus the industry.
Since the beginning of the century, three refineries on the U.S. East Coast have shuttered, while others, including PES, went to the verge of closure.
The region’s refineries were among the biggest beneficiaries of the U.S. shale boom in North Dakota, which offered them discounted crude. But the discount has vanished, along with booming profits.
The operators of the Come By Chance refinery are SilverPeak Financial Partners, a group of Wall Street veterans, including Neal Shear, who helped build Morgan Stanley’s oil trading division; Kaushik Amin, former chief executive officer of RBS Sempra Commodities and global head of liquid markets for Lehman Brothers; and Harsh Rameshwar from Merrill Lynch Commodities.
They purchased the plant in 2014 from South Korea’s national oil company.
The team of former Wall Street oil traders remain in a legal dispute with BP PLC BP.L, the refinery’s crude supplier The legal fight stems from, among other things, what represents the best crude diet for the plant.
The BP contract expires at the end of the year.
Reporting By Jarrett Renshaw; Editing by Bill Trott