Pumping the brakes

By Geoff Lee

August 14, 2017 1:07 PM

Husky Energy has put a decision to invest $700-900 million to expand asphalt refinery capacity in Lloydminster on hold indefinitely.
The delay kills the short-term prospect to double Husky’s asphalt refining capacity to 60,000 barrels a day of Lloyd thermal and with it, up to an estimated 600 construction jobs at peak.
The decision comes with an announcement today by Husky to purchase the Superior Refinery in Superior Wisconsin, from Calumet Specialty Products Partners LP for $435 million U.S.
“It was an attractive acquisition prospect that allows us to add asphalt production capacity for significantly less than a new development,” said Husky spokesperson Kim Guttormson.
“It will add immediate asphalt production, enhancing our ability to capitalize on growing asphalt demand associated with increasing infrastructure spending across North America.”
The 50,000 barrels per day permitted Superior Refinery currently produces about 9,000 barrels a day of asphalt, in addition to 17,500 bbls a day of gasoline, 10,900 bbl a day of diesel, as well as heavy oil fuels.
The transaction includes the acquisition of the refinery’s associated logistics, including two asphalt terminals, 3.6 million barrels of crude and product storage, and a fuels and asphalt marketing business.
Husky currently markets asphalt in both Canada and the U.S., and the company held an open house in Lloydminster in March to unveil plans to build a new asphalt refinery directly south of the Lloydminster Husky Upgrader.
The expansion would double asphalt production to 30,000 bbls a day.
Economics and business integration were among the deciding investment factors given at that open house, with the investment decision originally expected to be made late this year or in the first quarter of 2018.
Guttormson said Husky still believes there is a strong economic case for a future asphalt refinery expansion in Lloydminster.
“While an investment decision will be deferred until 2020, it will be considered again as our heavy oil production grows,” she said.
“The acquisition of the Superior Refinery increases our capacity to process heavy oil, in line with our growing thermal production.”
Husky plans to increase Lloyd thermal production by about 50 per cent over the next five years.
In the Lloyd region, Rush Lake 2 is expected to come online in 2019 and three more 10,000 bbls/day thermal projects are expected to begin production in 2020.
During Husky’s Investor Day on May 30, the company announced plans to bring on a couple more thermal projects each year in 2021 and beyond in the Lloyd region.
The acquisition of Superior Refinery will allow Husky to capture full value from the heavy oil production in Western Canada, while also providing Husky with direct connectivity to their heavy oil terminal in Hardisty via Enbridge’s mainline pipeline to the Superior WI, Terminal.
Enbridge is currently replacing and upgrading its main Line 3 pipeline to support Canadian crude oil production growth and U.S. and Canadian refinery demand.

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