Husky mulls refinery expansion

By Geoff Lee

November 1, 2016 12:00 AM

ON THE WAY OUT Husky Energy CEO, Asim Ghosh, left, pictured in 2012 during the opening of Husky Place in Lloydminster, announced on Oct. 27 that Husky can add another 150,000 barrels of thermal oil production over time. The company is also working on a pre-front end engineering design for a potental 30,000 barrels per day expansion of its Lloydminster asphalt refinery capacity. Ghosh will retire on Dec. 5 to be succeeded by chief operations offcer, Rob Peabody as chief executive.

Asphalt refinery capacity could double

Husky Energy is drafting a plan that would double the capacity of the Lloydminster asphalt refinery as thermal oil production in the region increases, the Source has learned.
The Calgary-based company has started pre-front end engineering design (FEED) work for a potential 30,000 barrels per day expansion of its asphalt refinery capacity.
At the same time, Husky is assessing 17 new thermal projects in our region that could add an additional 150,000 barrels per day of higher quality thermal production over time.
This includes three 10,000 barrels per day projects expected to be sanctioned soon.
Site preparation is progressing at Rush Lake 2, another 10,000 barrels per day project that’s slated for first production in 2019.
These developments came to light with the release of Husky’s third quarter results on Oct. 27.
“In regards to our asphalt business, we have started pre-FEED work on a potential 30,000 barrels per day expansion of our refinery capacity in Lloydminster,” said chief operating officer Rob Peabody in a conference call.
“It’s clear that the business is continuing to show strong returns and can provide an additional outlet for our Lloyd thermal production which is an ideal crude for making asphalt.”.
“We’ll have more to say on this after the work is complete.”
Cheerleading the plan locally is Gerald Aalbers, the newly elected Mayor of Lloydminster, who will continue to work in the oilpatch until he’s sworn in on Nov. 7.
“It’s great news locally—anytime economic development happens in a jurisdiction, it’s a wonderful thing,” he said.
“I can’t say enough that Husky is investing in our community again.”
Aalbers said he’d been hearing through the grapevine for weeks that Husky has been talking to suppliers about getting preliminary cost estimates for the pre-FEED design.
“I hope there are more announcements in the future from companies that are in the area that are going to make a significant investment in the long term,” said Aalbers.
Husky media spokesperson, Mel Duvall, told the Source there is no firm timeline to complete the design work, but an expanded refinery is high on Husky’s priority list.
“When you look at all the things we see as priority items for the future, it is one of the ones at the top of the list; it’s something that we see as being very attractive,” said Duvall.
“We’re doing the pre-FEED right now on it, which will give us a better idea of the costs and we’re also looking at a couple of options for it as well.
“It would more or less double the asphalt production capacity we have in Lloyd.”
Duvall said the study will also determine the ideal location for the refinery with a site near the upgrader a good possibility.
“That’s one of the things we’re looking at right now—does it make more sense to just expand the current refinery or would it make sense to do it connected to the upgrader?” he said.
He agreed that a potential asphalt refinery expansion is welcome news for our city along with the prospect for new jobs that would come with a sanctioned project.                                                                 
“Our history in Lloydminster is one that’s more than 70 years old and we often call it the true root of our company strength–it continues to be that,” said Duvall.
Duvall noted expanding the asphalt refinery makes economic sense, given Husky reported third quarter margins of $22.99 a barrel for Lloydminster asphalt.
Husky also hit its thermal production milestone of 100,000 barrels of oil per day, including production from Tucker Lake near Cold Lake in the quarter, well ahead of schedule.
In fact, Husky’s current thermal production is more than 115,000 barrels per day.
Three new Lloyd thermals have been brought into production this year including, Edam West, Vawn and Edam East.
Husky reported a $1.4 billion profit in the third quarter of 2016 compared to a loss of $4.09 billion in the same quarter a year ago, assisted by the $1.3 billion sale of 27,000 barrels of oil equivalent per day of Western Canada assets.
Peabody said Husky has replaced that sold production almost barrel for barrel by new, lower cost, higher netback, Lloyd thermal production.
“This is a good example of how we are continuing to transform Husky,” said Peabody, who will succeed Asim Ghosh as company president and CEO on Dec. 5.
“Rob’s proven business acumen and track record of execution will guide Husky in its next phase of growth,” said the board in a statement.
Ghosh will remain on the board of directors after his retirement.
His seven years as Husky’s top executive has been marked by his ability to reshape and position Husky for continued growth.
In his final quarterly outlook, Ghosh said looking to next year, Husky will maintain the strength of its balance sheet within their cash flow.
He went on to state, “However, the difference, as a result of our successful efforts to lower our costs and increase our productivity is, we are now in the position to deliver consistent growth and margin expansion in the current price environment,” he said.
“Next year’s plan will reflect this shift.”

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