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Toronto Star: Shell Canada plans new refinery in Ontario

CALGARY, Alberta–Shell Canada Ltd. has settled on a location in southern Ontario for its planned heavy-oil refinery, but most other details for the new facility are still being worked out, a spokeswoman for the company said Thursday.

The company, Canada’s No. 3 oil producer and refiner, said the new operation is likely to be built near the small community of Sombra, which has a population of about 280. Sombra is south of Sarnia, the center of Ontario’s petrochemical industry.

The new plant will process between 150,000 and 250,000 barrels a day of heavy oil from Shell Canada’s oil sands operations in Alberta but other details, including cost, configuration and a potential tie to the company’s nearby 72,000 barrel a day refinery in Sarnia, are still sketchy.

“We are looking to integrate our oil sands production … but all other options are still being assessed,” said Leigh Anne Richardson, a Shell Canada spokeswoman. “We are still in the infancy stages.”

Though a final decision on going ahead with the plant may not be made until 2010, the facility is one of three new refineries being touted in Canada.

The other proposed plants are located in the eastern provinces of New Brunswick and Newfoundland. There hasn’t been a new refinery built in Canada since 1984, when Shell Canada opened its 98,000 barrel a day Scotford operation near Edmonton, Alberta.

The new refinery would primarily serve the Ontario market, Canada’s largest, Richardson said. The supply of refined products to the region is tight, and a fire last month at an Imperial Oil Ltd. refinery led to temporary gasoline shortages in the province as some service stations ran dry.

“The market in Ontario is tight, but that’s true of nearly every single region in North America,” said Michael Ervin, of M.J. Ervin & Associates, a petroleum marketing consultancy.

Royal Dutch Shell is looking to buy out the minority shareholders in its Canadian unit, and some analysts have said it may not back Shell Canada’s capital spending plans. However, Richardson said the parent company has been involved in the planning of the new refinery.

“They’ve been along on the process from the get-go,” Richardson said. “We don’t know (Royal Dutch Shell’s plans) and until we do we’ll carry on business as usual.”

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