The provincial government has committed to help maintain warm idle mode at the Come By Chance refinery while the owner continues to search for a buyer or investor.
Friday afternoon, the government announced a $16.6-million funding agreement with North Atlantic Refining Ltd. (NARL).
Industry, Energy and Technology Minister Andrew Parsons says there are presently between 110 and 120 workers employed at the refinery, and this funding will see that figure climb to a minimum of 200 full-time equivalents before the end of the month.
It will cover 75 per cent of labour costs and 50 per cent of costs associated with the warm idle and restart preparation work while it remains offline. The funding is non-repayable and will cover a seven-month-period ending June 30, 2021, or until the refinery is restarted or sold. The identified cost of keeping the refinery in warm idle is approximately $41 million, Parsons said.
Parsons said the funding protects the asset and increases the likelihood it will eventually be sold. If warm idle mode were to cease, there's a chance the refinery would never restart, he said.
"If people ask, 'What is the other option?' a closed refinery that likely never opens again," the minister told The Telegram Friday.
Down for months
The refinery shut down in mid-March amidst a rapid decline in demand for petroleum products due to the COVID-19 pandemic. Silverpeak, the American investment firm that owns NARL and the refinery, had a deal in place with Irving to sell NARL, but it later fell through.
There have been other suitors, including Origin International, which went public about its interest in the refinery, but Silverpeak rejected the company's offer last November.
"When I'd spoken earlier, the emphasis was absolutely on trying to help with the process to find a new purchaser, a new investor," Parsons said. "Given that it's not our asset per se, it's extremely difficult to run that process. … But as you get closer to the winter, the reality is that if the refinery went cold, the cost of restart would be ridiculous. It would be very cost-prohibitive to actually see that restart again."
He said this request for help was in front of the government "for some time," and the agreement was finalized Friday. The continued warm idling and restart prep-work gives hope for the site's future, Parsons added.
"There's conditions attached here where Silverpeak has to in good faith continue to engage in a search for a purchaser," the minister said, adding conversations to find a new buyer have slowed down with the season change.
"We've got the one known that everyone is aware of, Origin, who are still there," he said. "We have others unnamed that are working, and we've been in conversations directly with some. The fact is, this is an extremely tough time. There's nobody buying refineries in January."
Parsons said with the COVID-19 vaccination rollout ongoing and the price of oil improving, the likelihood of a purchaser being found will get better with time.
Andrew Robinson is a business reporter in St. John's.
