Curtailment backlash at province from Shell Scotford

Shell Scotford provided Strathcona County council an update on Tuesday, March 11 which focused on impact of the recent oil curtailments by the province as well as advocacy work required to support the energy sector, such as regulatory approval times and pipeline access to world markets. Photo Supplied

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During an update to Strathcona County council this week, Shell Scotford didn’t mince words when blasting the province’s recent curtailment measures.

On Tuesday, production manager at Shell Scotford site, Luc Schauete, outlined while curtailment addressed some of the upstream pain in producing at the mine phase or conventional oil wells in not getting a fair price, it was not a favourable move for a larger refinery.

“It resulted in the loss of tens of millions of dollars on our margins and we’re not alone. The other people who run refineries in the area have experienced the same December-January headwinds,” Schauete told council. “I see as a province that we’re making moves to adjust to provide a competitive landscape, but not all of it works out for the best for people that are in the business in different spectrums.”

December saw the province direct the production of raw crude oil and bitumen to be reduced by 325,000 barrels per day to address the low price for West Canadian Select oil. In January, slight relief was granted with a 75,000 bpd increase, followed by another provincial announcement last month to increase by the same amount again for March and February due to declining storage levels.

The company also knows that it will have to change its approach to producing liquid fuels over the medium to longterm because of changing consumer concerns about climate change. That consumption change is expected to take decades and Shell outlined it is ready to change with the times.

“It’s not something that is easily deniable anymore and at Shell we don’t. We believe in climate change and believe in the perspective and insights of the consumer to be changing and we see in the future a transition from producing hydrocarbons for transportation fuel to producing hydrocarbons for other uses and benefits to society as a whole,” the Shell rep said, adding Britain and the Netherlands have already legislated when conventional automobiles will no longer be allowed. “You can see that kind of certainty, and as a company, some people may think that’s quite scary, but we believe the opposite. That time of legislation provides clarity for what you have to do as a business to compete, what you have to do in order to responsibly produce some of those fuels, or what you can use them for as alternatives. We do see a change. Alberta is not isolated. The customer face is changing and people are looking at alternatives. We are seeing, if not experiencing, the plateau for some demand, so we’re not seeing the need in the province or this orbit of users for the same demand for liquid fuels.”

Praise was given to the province in terms of movement on transiting to petrochemicals, such as attracting more investment dollars to the Industrial Heartland, however, Schauete argued those steps are incremental and more advocacy is needed to clear up regulatory approvals and pipeline and market access.

“Those steps are not significant enough to move a global company with global perspective to invest in a material way. I don’t say that lightly. I say that as an Albertan, I say that as a corporate citizen, I say it as a person who has worked internationally with a company of this size. If we want to continue to attract material — tens of billions of dollars in investment, like how currently the (U.S.) Gulf Coast, India or China are, we have to fix and repair the market landscape that exists here today,” he stated. “We bear too many burdens of uncertainty around regulatory approvals, we are unable to get to and access tide waters, and we struggle with a tax regiments and associated regulatory framework that bring and attract that others are.”

Mayor Rod Frank reminded the Shell contingent he will be presented a resolution on behalf of the county at the upcoming spring Rural Municipalities Association (RMA) conference that will ask the province to actively advocate to develop and implement a targeted, national education and marketing campaign about the energy sector. The hope is that it will address offsetting foreign protectionism and de-marketing campaigns, regulatory delays, and combined infrastructure and economic factors, that negatively impact Canada’s local, provincial and national economies. He echoed Alberta’s Industrial Heartland Association’s continuous goal to attract $30 billion in investment by 2030.

“We are a community that understands the importance of attracting business and industry to ensure that you feel that you can do business here,” Frank said, adding the county is well aware of problems facing industry such as pipelines, access to tidewaters, regulatory processes and the price differential. “Our council and community go out of the way to promote that if you’re concerned about the environment, this is the place to support. Our human resources standards, labour standards and environmental standards are some of the highest in the world. Fossil fuels aren’t going away; 1.1 per cent of the world’s energies are supplied by solar and wind. We have to live with this for a while so let’s do it in a smart way.”

Turnaround activity

Two turnarounds are scheduled for 2019 at the Shell Scotford site, one this spring for 30 days and another in the fall for its chemical complex and the refinery. About 1,000 trades people will be involved in that process. Schauete noted the two 2019 turnarounds are expected to be smaller in scale compared to the larger annual events coming in the years to follow.

“Over the coming years, we see a significant event per year that will result in more sustainable jobs. That’s about turning around the upgrader facility in 2020, 2021 we see a major event and 2022 another upgrader event. This year is a little lighter of a portfolio for us, but still ultimately, it will attract a number of man-hours and jobs for the local community,” he said.