WATCHING GOVERNMENT: The benefits of initiative

May 21, 2007
Kenneth Irving, chief executive of Irving Oil Ltd. in St. John, NB, has a recommendation for his refining competitors in the US: Don’t resist the push for action on global warming. Embrace it instead-but carefully.

Kenneth Irving, chief executive of Irving Oil Ltd. in St. John, NB, has a recommendation for his refining competitors in the US: Don’t resist the push for action on global warming. Embrace it instead-but carefully.

He and the company his grandfather started in the 1920s have benefited from promptly investing to produce fuels that respond to environmental concerns, such as low-sulfur gasoline and diesel fuel.

“We don’t see a sudden and complete withdrawal of petroleum products from the energy equation. We do see a gradual reduction in their share of overall North American demand,” he said at the Deloitte 2007 Energy Conference May 14 in Washington, DC.

This raises a question of whether future processing investments will be confined to areas where demand is growing. “It’s possible that future product suppliers will have to meet more stringent emissions requirements in North America while leaving a bigger carbon footprint abroad,” Irving said.

He still has questions about nonpetroleum motor fuel alternatives, however. “The biggest one is whether all the new plant investments that are being encouraged are moving ahead before their life cycles have been determined,” he said.

Series of firsts

Irving Oil has benefited from moving quickly. When it built its refinery in 1960, it was in a unique line formation on 780 acres that allowed for expansions in 1971, 1974, and 2000. The current crude capacity is 250,000 b/cd. Irving was the first Canadian refiner to produce high-octane gasoline without lead additives. It offered low-sulfur gasoline 5 years before requirements for the fuel took effect. It was the first Canadian refinery to produce ultralow-sulfur gasoline and diesel fuel.

One result, said Irving, was that Irving Oil supplied CARB-formula gasoline to California as many refineries there were still reconfiguring operations.

It also began seeking permits for an LNG terminal in the late 1990s, which its CEO said puts it ahead of many competitors. And it has several thousand acres of industrially zoned land next to one of North America’s few true deepwater ports so it can build a second refinery.

No NIMBY here

The company emphasizes local public involvement as it grows, Irving said. “There’s strong local concern about environmental impacts. There’s also a surprising amount of interest in where a project fits globally. People in New Brunswick seem to think they’ll have more influence if a project is close to where they live. It’s the opposite of the ‘not-in-my-backyard’ attitude you hear about.”

He suggested that refiners adopt new definitions of what constitutes reliable supplies. “Petroleum still constitutes 50% of all energy consumed, so our industry shouldn’t be let off the hook in considering ways to better meet future demand,” he said.

As for dealing with greenhouse gas emissions, said Irving, “Why wait for regulations? If we can do it, why not get on with it?”