|
|
|
Shaheen Refinery Plan For Newfoundland Ingenious, But Detrimental To National Interest, Nickle Declares
The Shaheen oil refinery plan for Newfoundland was weighed and found wanting, and a new hard look at it was called for, by Carl O. Nickle, publisher of the "Daily Oil Bulletin", on July 6th. Mr. Nickle's comments were made on his weekly-televised show "C. F. C. N. T. V. OIL REPORT"; content of which is solely the responsibility of the commentator. The program is sponsored by The Bank of Montreal, normally sticks to factual comment on developments pertinent to oil, but occasionally presents Mr. Nickle's editorial opinion. The comments on the Shaheen plan (text of which appears below) are in this category.
New York Promoter John Shaheen has done a good job of selling a dream to Newfoundland a $200,000,000 industrial complex that would turn the tiny hamlet of Come-By-Chance into a bright light guiding Newfoundland to industrial greatness. The dream includes 100,000 barrels per day oil refinery, whose target will be Eastern Canadian and U. S. markets. By ingenious means, it would strike at the heart of National and Continental Oil Policies, carefully built over recent years.
Shaheen Natural Resources Co. Inc. of New York is a private company headed by John Shaheen. It has oil investments in many parts of the world, plus forest and mineral holdings, but few details are available. Certainly in biggest promotion is a $200,000,000 complex planned for Come-By-Chance, now a hamlet on the northeastern coast of Newfoundland. It would include a 600 tons per day Newsprint Mill, a 1,000 tons per day Ammonia Plant, and a 100,000 barrels daily oil refinery. Kingpin would be the refinery, which would use oil from overseas.
Over the past two years, Shaheen has soundly convinced Premier Joey Smallwood of the merits of the project for Newfoundland, Canada's offshore province. So convinced, in fact, that the Province recently guaranteed a $30,000,000 Eurodollar loan in Germany to help finance Shaheen's refinery. Two of Joey's Cabinet Ministers didn't like it, and resigned.
But Joey's support goes further. The Newfoundland Government will, in effect, own the proposed $95,000,000 refinery, through a Crown Corporation, though it will be operated by Shaheen, Newfoundland's Crown Corporation would be exempt from Canadian Income Tax and Provincial Taxes, and the refinery would thus have a unique economic advantage over all other refineries with which it would be competing. That is, unless Ottawa finds a means of plugging the tax loophole. The New York company has the option to buy the plant for One Dollar after 15 years, provided it has repaid the $30,000,000 loan, and contributed $10,000,000 in working capital.
Shaheen directly backed by Newfoundland's Smallwood, has formally applied to the U.S. Interior Department for oil import quotas that would allow the proposed refinery to sell part of its products to marketers in the U. S. Atlantic States. U. S. Oil Policy is designed to encourage adequate oil production and transport facilities within North America, limits dependence on overseas origin oil by strict Import Quotas. The U. S. isn't likely to let Newfoundland become an open back door to the American market.
Shaheen has therefore come up with an ingenious plan. It would make aviation jet fuel a principal product, would ship it in bond to U. S. Airports to fuel Aircraft flying overseas. Since this would displace fuel from U. S. refineries, the government in Washington may be expected to seek means of preventing it.
The Newfoundland refinery would, by itself, be capable of supplying two thirds of the needs of all four Canadian Maritime Provinces a region where current refineries and planned, additions in Nova Scotia and New Brunswick are already far in excess of local needs.
This obviously means that prime market target for Shaheen would be Central Canada. Here, the mass market of Quebec is already served by oil of overseas origin refined in Quebec and the Maritimes, and the mass market of Ontario is committed to oil originating in Western Canada under the present voluntary National Oil Policy.
Shaheen makes no secret of the fact he is seeking sales contracts with marketers in the Central Provinces, to support the Planned Newfoundland refinery and is banking on such Airports as that of Toronto to use its jet fuel.
A few days ago source of oil for the proposed Shaheen refinery became known. Premier Smallwood announced agreement has been reached with British Petroleum Company to supply 365 Million barrels of Middle East. African and other overseas oil over ten years, full capacity of the 100,000 barrels daily plant, B&P is 48% owned by the British Government, 52% by private capital, While B&P is refining and marketing in Ontario and Quebec, and is involved in exploration and production in Western Canada, its big stake is overseas, where it has nearly 2.5 Million barrels daily of oil to market.
For Canada, the Newfoundland oil plan poses some serous questions. The nation cannot jeopardize its own future security of oil supply by lessening incentive to explore for more oil in Alberta and its neighbor areas. It cannot ignore the fact that domestic oil has a greater multiplier benefit to the internal economy than does overseas oil, and also helps balance our external trade and finances.
Canada cannot afford to jeopardize it, own National Oil Policy and its massive benefits, the hardwon preferred status for Canadian oil in U.S. markets, by standing aside until a threat becomes reality in Newfoundland. Nor can the nation accept the precedent of income tax exemption for a refinery. Nor can Newfoundland's people stand the burden of a $30,000,000 guarantee if the project goes ahead and fails.
Both Ottawa and Newfoundland should take a new hard look at the Shaheen promotion, in the light of national interest, rather than what is good for Come-by-Chance and the economic interests of Shaheen.
