Bull's eye for the Bear

 

 Algoma Central Corp's tanker subisidiary Algoma Tankers has announced a major development. The company has ordered two 37,000 dwt ice class product tankers from Hyundai Mipo for delivery in 2025. The ships will be methanol and shore power ready.

Most surprising however is that the ships will take up long term charters with Irving Oil. That company currently charters two ships (also built by Hyundai Mipo) from the Dutch company Vroon, which will be turning twenty years old in 2025. Acadian and East Coast, trading under Canadian flag, deliver Irving Oil products in eastern Canada ranging from St.Lawrence River and Gulf ports to Newfoundland, from Irving Oil's refinery in Saint John, NB. (Three other tankers of the same vintage, also on charter from Vroon to Irving Oil, fly the Marshall Islands flag, and operate between Canada and the United Staes. No announcement has yet been made about their replacements.)

 Algoma Tankers was established to take over the fleet of Imperial Oil tankers, and has been largely dedicated to serving its refineries and depots on the Great Lakes and eastern Canada. The new ships will be dedicated to Irving Oil work, although some exhange of product does take place with other oil companies.

The current Irving charters are painted in traditional Irving tanker colours (Irving once owned a large fleet of tankers)  and wear the Irving Oil symbol on their funnels. [Their scrubbers were retrofitted and are housed in plain white structures]. The Vroon "V crest appears on the bows. It will be interesting to see what the new ships will look like.

 

 And what they will be called:

For what it is worth, my guesses are that they will be painted in the Irving colours, with Irving Oil funnel marks, and names similar to the current ships - that is to say no direct reference to Irving or Algoma.

 Two interesting side notes to this news may or may not be relevant:

1. Irving Oil has recently made it known that it is reviewing options for the future that could include members of the Irving family selling the company. The family's various interests are now relatively separate. The J.D. Irving companies, such as Irving Shipbuilding Inc, Atlantic Towing Ltd and Harbour Development Ltd and their wood, paper, steel, construction and trucking operations  have no connection with Irving Oil, and the announcement has little if any bearing on them.

2. Vroon has recently been re-organized with lenders taking equity for debt, and has opted to sell off their offshore supply and support vessel business. Whether this had any bearing on Irving Oil's decision is of course unknown to me, but Algoma has certainly established itself as a stable and growing company.

They have rccently disposed of older ships and acquired newer ones on the strength of existing business.

 

Algoma Central has also expanded well beyond their orginal Great Lakes bulk carrier business, and are now partners in Nova Algoma Cement Carriers (NACC) and coastal cargo ships and tankers in Europe as well as self-unloading bulk carriers in the CSL Americas pool.

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Dartmouth Refinery - green light at the end of the tunnel

A big part of the business of Halifax Harbour involves incoming crude oil.

The federal government's Minister of Natural Resources has "given the green light" to a proposal to convert a gas pipeline to an oil pipeline and to extend it from Quebec to Saint John to provide Alberta bitumen to the Irving Oil refinery.
This strange support, given that it is the National Energy Board that actually approves such things,  could be considered political tampering in an established regulatory framework if another minister did it (or the mayor of Toronto, say), but I guess it is OK for the Oil minister to give the political signal that the government wants to ship Alberta Oil to the Maritimes.
I'm not saying I'm against it either, but since no application has actually been made to the regulator it does seem like jumping the gun a bit. So I am giving the proposal my "Amber Light."
Here's what I think should and should not happen if the 1mn bbls per day of  Alberta tar sands bitumen makes it to the east via pipeline.

 Most crude is imported from the world spot market.

1. The Province of Quebec will have to OK such a pipeline through its sovereign territory, and that is not a foregone conclusion by any means.Their biggest refinery, Ultramar in St-Romauld, (Lévis) gets its crude from Algeria as far as I can tell - and that is a far from a stable domestic source as we have seen recently. They will want some cheap Canadian crude too - lets say 200,000 bbls per day. They aren't the only Quebec refiners, so Petro-Canada will want some, say another 100,000 bbls per day or more.
2. A certain amount must be doled out to keep the Imperial Oil refinery in Dartmouth a viable entity, and even expand, say 100,000 bbls per day. The pipeline will never be extended from Saint John to Halifax, so Irving will have to guarantee sea or rail delivery of the 100,000 bbls per day as a cost of doing business.

Refined product is distributed to all of Atlantic Canada, and into Quebec from Halifax.

3. If Irving Oil gets the rest, 600,000 bbls per day, that would allow them to double the size of their current refinery.
They are already getting Bakken crude from North Dakota by rail, so they are already competitive in the US retail market, where most of their output goes now. However they are still selling into the Canadian market as if their crude comes from overseas. Therefore the price of this deal to Irving must be that they sell refined product in Canada at the same price as Alberta pays for gasoline at their pumps (taxes excluded of course.)
4. Drastically bringing down the price of gasoline in Atlantic Canada would of course probably mean that all Newfoundland offshore oil production would have to cease because it would no longer be competitive in Canada. However it could be exported more widely without any messy pipeline debates in B.C, and it is a lot nicer oil than Alberta tar/ shale/ bitumen/ or what ever critics want to term it.Newfoundland oil is "clean" oil by comparison. Of course the lower price of fuel in Atlantic Canada can only spur our economy - or does that really matter?

Newfoundland shuttle tankers would still shuttle oil to terminals where it would be sold abroad for world prices, however it would be too expensive to use in Canada.

5. What must not be allowed to happen is for Alberta bitumen to sell at international prices as as soon as it hits tidewater. Irving must guarantee to use every drop of its 600,000 bbls and not to sell any crude - only to sell refined product. Canada must become absolutely 100% weaned off foreign crude oil before a single drop of Alberta bitumen leaves our shores. Ultramar, Imperial and the others must also agree to this deal and not sell their their share overseas either.

 Why can't Canada become self-sufficient in oil and gas?

6. TransCanada Pipeline of course will also be part of this deal, and they will want to rake off transmission costs to actually pay for the pipeline. I propose a policy shift here however. Instead of the "meter" being at the user end (like electricity or water) I propose that the meter be at the "producer" end and that the Alberta producers pay a rate to ship their product off their property. They can still sell the oil per bbl, but they must also pay the shipping cost, so that all users along the length of the pipeline pay the plant gate price for the crude.
Regrettably I have no ability to bully the National Energy Board, so my Amber Light remains a caution, and I expect most "drivers", like the Oil Minister, will blast right through it instead of slowing to a halt and stopping to think this through.

This tanker was called British Destiny. What will be Canada's Destiny?