NEWFOUNDLAND AND LABRADOR
REFINING CORPORATION PROVIDES
SOUTHERN HEAD REFINERY PROJECT UPDATE
St. John�s , Newfoundland and Labrador: Newfoundland and Labrador Refining Corporation (�NLRC�) provides the following
update with respect to its proposed 300,000 barrel per day oil refinery project
in the province
of Newfoundland
and Labrador, Canada. The
project site is located at Southern Head in Placentia Bay.
Development
of the project and its key aspects continues to advance. The timeline to
project sanction continues to depend on receipt of all regulatory approvals,
engineering and design progress, completion of debt and equity financing,
potential partnerships and other commercial agreements. Below is an overview of
recent progress by category.
Environmental
Assessment
Earlier
this year the Province
of Newfoundland
and Labrador
accepted the amendments to the Environmental Impact Statement for the refinery
and informed NLRC that no additional work is required. The provincial
assessment process included representation from several federal government
departments and extensive public consultation and input.
The
Government of Canada has now also completed the public review of Transport Canada�s
Comprehensive Study Report for the Marine Terminal and Associated Works
component of the refinery project.�� The
Canadian Environmental Assessment Agency has reviewed public input and is
preparing its report and recommendations to the Minister of Environment Canada
for a decision.
Design
KBC
Advanced Technologies plc. (�KBC�), a leading consultant to the global refining
industry ( www.kbcat.com),
has recently provided NLRC with an independent review of its initial project
configuration work. This work has enabled NLRC to reaffirm the fundamental
project concept including site location, scale and feedstock selection. The
KBC review also identified opportunities to increase crude oil feedstock
flexibility and yields of middle distillates such as ultra low sulphur diesel
and jet fuel, the net effect of which would improve the refinery�s
economics.�� NLRC has elected to modify
its configuration to capture these optimization benefits and it is expected
that such work will add additional months to the previously envisioned project
schedule.
Business
Fundamentals
NLRC�s
current economic model, which does not yet account for the optimization
opportunities identified by KBC, continues to indicate attractive refining
margins and financial returns.
The
location of the proposed refinery relative to North American and European
markets and its deep water port are key competitive cost advantages. The
emphasis on heavy, sour crudes and middle distillate manufacturing means that
the indicated margins for the project under current market conditions have
remained strong. This is in contrast to recent weakness in much of the sector
due to rapidly rising benchmark crude oil prices and softening North American
gasoline margins.
The
existing market and future expectations for middle distillate demand and
margins are considerably stronger than for gasoline. The optimization work
described above is therefore attractive because it offers the potential to
further increase the expected middle distillate-to-gasoline yield beyond the
currently designed two to one ratio.
Project
Finance
The
Company has received proposals from several major banks and investment banks
for comprehensive advisory services that include debt and private and public
equity structuring and placement and NLRC is evaluating these proposals.
Receptiveness
towards the project�s economic fundamentals has been positive and there is
continued confidence in the ability to attract capital. However, caution has
also been expressed that the timing and amount of any financing is subject to
capital market conditions. ��In
particular, it is noted that conditions in debt capital markets remain
challenging and that the timing of any improvement in those markets is
uncertain.�� Also considered are recent
general declines in the equity valuations of publicly-listed North American oil
refining companies, which may be reflective of increases in the cost of equity
capital.�� �
Efforts
to secure external project debt and equity investment as well as discussions
with potential major industry project partners are continuing.��� If current adverse conditions in capital
markets persist, NLRC is likely to elect to slow the current pace of project
development, resulting in delays in the commencement of construction and
eventual start-up.
Capital
Budget Update
NLRC�s capital budget is
currently being revised to incorporate KBC�s
recommendations. Since last year, key capital cost drivers such as total
equipment count, construction person-hours, and plot area have been managed
carefully and remain well-contained. However, NLRC has experienced some
escalation in its capital cost projection.��
These increases are due in part to the design improvements identified by
KBC and during ongoing project development. Such refinements are, in the
assessment of NLRC�s management team, warranted as
they enhance overall economics and/or mitigate risk.�� The remaining capital budget increases are
attributable to changes in currency exchange rates and some raw material
prices.� �
Commercial
Agreement
NLRC
has received proposals from a number of Tier I commodity trading houses for the
provision of comprehensive commercial services, including crude oil supply,
product off-take and marketing and inventory management and financing.� �
General
NLRC
has received proposals for the ownership, operations and or financing of a
number of material assets such as the Company�s tanks, terminal, jetty, sulphur
and petcoke storage yard. The Company recognizes
potential value may be realized in separating the ownership, operations and
financing of such energy infrastructure assets where NLRC maintains control and
achieves favorable economics.� �
For further
information please visit the NLRC website at www.nlrefining.com or contact our
corporate office .
Media Contacts:
Brian Dalton
(Director) or Roland Butler (Community Inquiries), 1-888-570-3442
brian@nlrefining.com ������/������ roland@nlrefining.com
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Tel: (709) 576-3440
Toll Free: 1-877-576-2209 Fax: (709)
576-3441 Email: info@altiusminerals.com
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