Whether they're crossing the border into the United States or heading west to the British Columbia coast, the controversial pipelines linked to the Alberta oil sands have one purpose: to get the thick, heavy bitumen out of the country.
But Enbridge's (TSX:ENB) Northern Gateway and TransCanada's (TSX:TRP) Keystone XL pipelines, which have been fighting for the approval of governments, regulatory agencies and the public, have renewed a debate over whether Canada should be refining the raw bitumen at home instead of exporting it to be refined farther afield.
The federal NDP think we should, arguing new refineries would be a boost to the economy and create much-needed jobs.
So does B.C. newspaper mogul David Black, who raised eyebrows — and rolled some eyes — earlier this month when he proposed a $13-billion refinery at the end of the Northern Gateway pipeline on British Columbia's coast.
However, there hasn't been a new refinery in Canada since 1984, and many observers say that's unlikely to change any time soon, whether in B.C. or elsewhere.
Oil refining is a volatile, low-margin business, they say, and it's far cheaper and much simpler to export crude to countries that already have refineries ready and willing to process it, particularly the United States and China.
Canada is a net exporter of oil, and the increasing production from the oil sands combined with the closure of Canadian refineries mean the amount of raw crude leaving this country to be refined elsewhere will only increase.
Production in the oil sands is projected to double by 2035. At the same time, the number of refineries in Canada has been steadily decreasing, from more than 40 in the 1970s to fewer than 20 today. Several of the refineries that still exist are at risk of closing or are already scheduled to shut down.
Building a new refinery would be a long and expensive proposition. Such a facility would cost billions of dollars and likely take a decade to obtain the necessary government approvals and build, says Moore.
Compare that to the alternative: exporting crude to the United States, where refineries are far below capacity and eager for Canadian crude, or to Asian countries such as China, which is constructing massive refineries to meet that country's rapidly growing demand.
A report last year from the Conference Board of Canada noted the current roster of refineries still operating in Canada is more than enough to meet domestic demand. While the number of refineries has been cut in half, upgrades and expansions over the years have kept the refining capacity at the same level and Canada continues to refine more fuel than it needs.
That means any additional oil production — whether in the form of crude or refined fuel — would be destined for export.
It's more complicated to export refined products, rather than simply exporting raw crude, because every jurisdiction has different standards for fuels to meet, says one observer.
The federal New Democrats have suggested Canada needs more refineries, arguing such facilities would create jobs and bring in tax revenues, though the opposition party hasn't said how it would overcome the economic challenges that have until now prevented that from happening.
The federal Conservative government, a strong proponent of pipelines such as the Northern Gateway project and the Keystone XL line into the United States, appears content to let the market decide whether it's a good idea to build new refineries.
Natural Resources Minister Joe Oliver says the only alternative would be to build refineries with government money.
Oliver said even if Canada exports a significant amount of raw crude, the industry still keeps hundreds of thousands of people employed and pays billions of dollars in taxes and royalties.
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