Korea National Oil to shop Newfoundland refinery


The Come By Chance oil refinery in Newfoundland, which has attracted a series of owners over the years, is once again for sale.

Korea National Oil Corp., which inherited the 115,000-bpd refinery when it bought Harvest Energy in 2009, has hired Deutsche Bank to sell the facility, according to people familiar with the matter. It is unclear how much, if anything, the refinery could fetch should the company succeed in finding a buyer.

Harvest spokeswoman Kari Sawatzky declined to talk specifically about the refinery, which has changed hands four times since 1986, but said the company has been evaluating the different parts of its business since late 2012 to see what might go up for sale.

"We're looking at all of our opportunities right now," Ms. Sawatzky said.

Harvest lately has reported deepening losses at the facility. The company's refining operations, which are centered on Come By Chance, lost $106.6 million in the first half of 2013, compared to a $92 million loss during the same period the year before.

Another factor that could give would-be buyers pause: Come By Chance's design makes for difficult operations. Built four decades ago, the facility is only accessible by barge, a more expensive mode of transport than pipelines -- and one that also isn't foolproof in eastern Canada's choppy weather. As the refiner's own website says, "It's not the most hospitable place for an oil refinery."

If the logistical impediments are bad, the market outlook is possibly even bleaker. North American gasoline demand is stagnating as more fuel-efficient cars hit the road. Analysts consider flat fuel sales in the US as the best-case-scenario for the next several years, with the US Energy Information Administration predicting fuel consumption actually will fall slightly next year.

The North Atlantic basin, Come By Chance's home, needs to shed refining capacity in excess of 1 million bpd to get the market back in balance, Bill Klesse, CEO of Valero, said during a recent meeting with investors.

The best hope may be for a potential buyer to emerge with a plan to deliver relatively cheap US crude to the facility instead of the more expensive oil from the Middle East and Europe that it traditionally has processed. Others have done that. Valero, the largest independent refiner in the US, is providing its Quebec facility with south Texas oil via barges. Carlyle Group, which last year took control of Sunoco's Philadelphia refinery, is attempting to connect that facility with supplies of cheap US crude, too.

The higher prices of imported oil prompted Sunoco to plan the closure of the Philadelphia refinery before Carlyle, prodded by White House officials, decided to invest in the facility's reconfiguration.

The owners of a 650,000-bpd refinery in the US Virgin Islands weren't so fortunate. After failing to find a buyer for the money-losing refinery, co-owners Hess and Petroleos de Venezuela (PdVSA) shut it down last year. It is now used to store oil.

"If the company can get (Come By Chance) sold at any price, it would be a positive," said Brian Youngberg, a senior analyst at Edward Jones.

Dow Jones Newswires

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