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Thursday, September 15, 2005

Opportunity is Knocking. Will Newfoundland and Labrador Let It In?

Rumors have been swirling around the province of Newfoundland and Labrador for months that Premier Danny Williams has been in discussions with Mr. Opportunity himself, Sir Richard Branson, about building an oil refinery in the province. Although these rumors were considered by many to be totally absurd, yesterday fuel was added to the fire when Sir Richard himself made it official that he is more than interested in entering the oil business.

Branson, the maverick business man and founder of such international interests as Virgin Records, Virgin Airlines and most recently Virgin Cellular, has become more than a little upset at the cost of fuel and how it is affecting his airline interests. In fact, his anger, combined with a clear understanding of the profits existing in today’s oil industry has spurred him to begin planning the development of a new independent refinery.

According to Mr. Branson, his plans are still in the early stages and he is actively seeking investment from other airlines with an interest in controlling their fuel supplies rather than being dependent on the major players such as Exxon, BP, Shell and others.

According to reports, Sir Richard has been investigating locations in every country from England to Africa and at this point the choice of location has yet to be determined. Although the site is not yet known, it is expected that any future refinery would not be built in the U.S. due to the complexity and volume of red tape involved in opening a refinery in that country. In fact, no new refineries have opened in the U.S. in nearly 30 years and this lack of refining capacity is considered to be one of the key factors behind current fuel prices.

In recent months Premier Williams has made it very clear to oil industry executives that he wants more secondary processing, in the form of refining, to take place in the province, rather than simply shipping oil elsewhere. Oil industry executives have balked at the idea of investing in a new refinery due to the cost of construction and the fact that low refining capacity world wide is helping ensure higher profits at the pumps. Regardless, Premier Williams has not walked away from his plans for this sort of development. Add to this his recent announcement that his government is embarking on an aggressive plan to assist business development in the province by reducing red tape by 25 per cent over the next three years and the possibilities become clear.

Enter Sir Richard and opportunity does indeed knock.

Newfoundland and Labrador, which has the highest unemployment rates in Canada is not only interested in hosting a new refinery and benefiting from the employment it would produce, it is currently the second largest producer of oil in the Country behind Alberta and its crude oil capacity is growing every year.

Newfoundland and Labrador, which is strategically located in the middle of the North Atlantic, might prove attractive to someone like Branson due to its location as well. Currently it is over flown on a regular basis by most international flights traveling between Europe and North America’s Eastern seaboard. In fact, before the dawn of the jet age, the island of Newfoundland was visited by nearly every plane needing to refuel before or after embarking on a trans-Atlantic flight. This, combined with its year round port facilities, makes it an ideal location for fuel shipment and more importantly to international airlines, for re-fueling.

Although some oil industry executives have dismissed the idea of an independent oil refinery being built due to the cost, an estimated $2 billion, it may still become a reality. All of the elements are there.

In Sir Richard Branson one finds a dynamic entrepreneur who has been known over the years for his “never say never” attitude. A man who was no doubt also told he was crazy when he decided to begin an independent cellular carrier and airline. A man who clearly understands that he cannot control his business costs in that airline unless he can control his fuel supply, and a man who recognizes a business opportunity where profits are now filling barrels and bank accounts to explosive levels.

In Newfoundland and Labrador, anyone hoping to build an independent refinery will find an interested government, a willing province, an available workforce, a strategic location, an easily accessible oil supply, a stable environment and a Premier who appears to be willing to think outside the box.

Coincidentally, the fact that the provincial government recently deposited a $2 billion oil revenue check and is in the process of determining how to invest some of that money can’t hurt.

Has Premier Williams discussed these possibilities with Sir Richard Branson?

If he hasn’t, perhaps he should.

7 comments:

MrChills said...

This seems to good to be true, but I will keep my fingers crossed.

We have so many opportunites here for growth in the province, and for once we have a no nosense administration that is running the province like a business.

Brian Williams said...

“Thinking outside the box”: A term used on this blog, as well as on some other NL blogs, as well as people/groups advocating for a better deal for this province.

It does seem that the “box” is a pretty small one. How can oil and gas refining, smelters, damming of rivers, cutting down more trees than is re-planted, building of large industrial complex’s be thinking outside the box, at least on a global perspective. Granted the province needs economic growth, people need to be housed, fed, be able to have access to recreation, health, education in order to grow as a community. But all I see is advocacy for old technology growth.

Take power generation as an example. Everybody and his dog seem gung ho on building more dams on the Grand River in Labrador. People are coming up with all sorts of ways to reel that power out to ‘large markets’ and others want it reeled more locally as well as to outside. Some want it reeled to coastal Labrador towns. I see this as either a political smoke screen or as sheer Foley.

This is 2005. For the small coastal towns the technology is there for small scale renewable energy projects that would not only be more economical in the long haul, but it would be kinder on the environment.
For larger centers on the island there is wind, solar, tidal, wave and other technology that is being used in many parts of the world. In Australia for example there are a number of wave and tidal projects on the go. We need to look at this very seriously; NL has no shortage of waves and tides. We need to look at the environmental impacts of such a project first, how it compares with the impacts down stream of damming rivers. I think it would have less impact if built on small scale for the local market.

It is an established fact that using renewable energy does produce long term jobs; it will leave the earth a better place for our grandchildren and their children, one thing that is not factored in by the so called “great thinkers” of today. It is also an established fact that dams produce many short term jobs and few long term jobs. Dams are not environmentally friendly as the “great thinkers” would have us believe.

There are many many ways to create economic growth without destroying what most people from away say is our biggest asset, so lets stop kidding ouselves by saying that todays politicians are "thinking outside the box".

Patriot said...

Brian,

As always, I appreciate your comments and those of others. Yes, we do need to look at alterantive forms of energy and alwasy be mindful of environmental impacts. Having said this, do you honestly believe we or anyone else in North America can walk away from the last major hydro electric project on the continent without developing it?

We have to understand that, unfortunately, with growth comes the necessity to give up something. It may not always be pretty, but it is a price we must pay.

Nobody, no matter how much they think outside the box, is foolish enough to believe that government on any level, will pony up dollars for non-mainstream projects like solar and wind, no matter how good they might be, without first exploiting the more mainstream and proven options available.

Reality sometimes is not pretty, but there it is.

Brian Williams said...

Talking of giving something up; well why not give up on some of the quickie status quo revenue streams and start acting like we are different, instead of the constant harping [by some] about how different Newfoundlanders are. Instead of the constant catch up policies why not get into a leadership roll, show the rest that things can be done differently, and still have a comfortable life style, while preserving the natural beauty that you mention. Lots of money in tourism to be made. Look at Andy’s latest coup, geysers in the middle of St.John’s to entertain German tourist, what a mind that geezer has.

Oil, gas can still be developed, but on our terms, other forms of renewable energy NEED to be developed now, not tomorrow. Let’s see real “thinking outside the box”.

Patriot said...

Quote from Business Week Magazine attributed to Richard Branson:

"I've had letters from the head of Newfoundland, saying we would love to have you come here. We've had letters from governments in North Africa, supporting the idea. In an ideal world, it's good to have a refinery near the market that uses the most fuel and that's America.

Patriot said...

Interesting stuff. Here is an excerpt from a Sept 17 article in an online travel magazine on the topic of airline fuel surcharges:

"Richard Branson, Virgin's chief executive, is considering steps to cut the escalating price of fuel. He was said to be in talks this week with BA's chief executive, Willie Walsh, about setting up an oil refinery in Newfoundland to supply jet fuel to Virgin and other airlines that join his consortium..."

Brian Williams said...

Early days yet vis a vis any refinery, lets hope some open discussions can be held, seem to remember Danny boy saying something about more transparency and democracy in Government. One should not hold ones breathe on that given his track record to date. My 10 cents worth is we need gas as well as heating oil, this is a priority, the jet fuel could be the catalyst. Let’s hope it’s not a give away, hard to compete with some of the other countries mentioned.