Asphalt output could double by 2020

By Geoff Lee

December 8, 2016 12:00 AM

If Husky Energy goes ahead with plans to double the current 30,000 barrels per day capacity of the Lloydminster Asphalt Refinery, it could be up and running by 2020.
Initial public discussion of the project timeline and payback period came during Husky’s investor day webcast in June.
“The asphalt refinery, present day, generates about $200 million EBITDA (earnings before interest, taxes, depreciation and amortization) per year,” said Bob Baird, senior vice-president, downstream in reply to an investors’ question.
“We’re just in the early stages of looking at the design basis right now before we can put a case forward to our internal Investment Committee for consideration,” he said.
“Looking at this now, payout might be in the order of about three years or less.”
When asked what the time frame would be for the refinery to come on stream, Baird said, “probably in the 2020 range.”
During husky’s third quarter conference call in October, former chief operating officer, Bob Peabody, who is now president and CEO, reported a pre-front end engineering design was underway for a 30,000 barrels per day expansion of the asphalt refinery.
“It’s clear that the business is continuing to show strong returns and can provide an additional outlet for our Lloyd thermal production which is an ideal crude for making asphalt,” said Baird at the time.
“We’ll have more to say on this after the work is complete.”
A decision on the next step is likely to come soon, but Baird made the case for it to investors in June as thermal production in the Lloydminster region continues to grow.
“This refinery vastly outweighs its profile in terms of our cash flow,” said Baird.
“It turns out, Lloydminster crude is the perfect feedstock for making high quality asphalt.
“This is an additional 30,000 barrels per day that does not require pipeline capacity.”
Husky is the largest producer of asphalt in North America with a lot of paving going on.
The company announced a contract last summer to sell 44,000 tonnes of asphalt to build the ring road around Regina.
Baird noted the economics for expansion are solid with consistent annualized realized margins for asphalt between $20 to $25 a barrel.
“Needless to say, this is a value chain that is ripe for expansion as we grow our Lloyd production through additional thermal plants, and what I really like about this industry, it doesn’t matter what kind of car you drive, even a Tesla has to run on asphalt.”

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