CALGARY, Alta. –A calamity of planned and unplanned shutdowns among at least three oil refineries in Alberta has created a shortfall of diesel, affecting the trucking industry in that province, as well as Manitoba, Saskatchewan, and northern B. C. It’s a situation that has been underway for a couple months, but has intensified recently.

Brett Gundersen, an owner/operator based out of Prince George, B. C. who hauls propane to the Alberta oilpatch, has had his own frustrations finding fuel. And despite reports of resumption of services with refineries that experienced shutdowns, Gunderson was still seeking fuel on Oct. 29.

“Yesterday I couldn’t get fuel in any Petro-Cans all way from Edmonton down to Calgary. I stopped at UFA(in Aidrie) and found some up there,” said Gunderson.

He felt that as a long-haul driver, he had more choice on the road than a local hauler who might be stymied by lack of supply.

“There are quite a few guys around Grande Prairie that aren’t moving at all. I have a friend that hauls fuel out of Prince George. He actually had a guy that runs some drill rigs in Grande Prairie call him and ask him to haul fuel (from Vancouver to Alberta).You can get fuel in (Vancouver) B. C., but you can’t get it in Alberta.”

Gunderson understands the need for periodic shutdowns, but he questions shipping oil to the US, when that country is enjoying a surplus.

“It’s so wrong. We don’t have enough refinery capacity in Western Canada, for one, to deal with what we’re doing. No one wants to build new ones because they don’t make the same profit.”

Mayne Root, the executive director of the Alberta Motor Transport Association, indicated that the situation has been building since late summer with the planned shutdown of one of the major producers for renovation/upgrades to their refinery in Edmonton.

“Some unexpected glitches occurred and they have been working to get back in operation, but do not anticipate getting up to full production for at least another couple of weeks,” he said in late October. “Combined with this, one of the other major refineries had a planned maintenance shutdown during some of this time, and another producer had to go offline for unexpected problems as well. In addition, according to the producers there was a higher than expected demand for diesel due to a late harvest season. As there was no reserve fuel, and the fact that the producers have closely matched production with demand on almost a daily basis, there is now beginning to be a real shortage of fuel for trucks, equipment and machinery in Alberta, Saskatchewan and Manitoba.”

For the Alberta trucking industry, this means that some carriers are being rationed as to how much fuel they can purchase on a daily or weekly basis and some of the smaller carriers are literally running out of fuel as they search for a facility that has fuel to sell, added Root.

“They are also taking additional time and (using more) fuel to find fuel supplies and the cost of diesel has not gone down as it has in the rest of the country (as much as 14 cents per litre). Fortunately, the weather has not turned cold as additional fuel is required to keep the vehicles operational during very cold weather (-20 C and below),” said Root.

David Bradley, president and CEO of the Canadian Trucking Alliance is incredulous that diesel fuel would be rationed in oil-rich western Canada.

“Carriers were seeing their fuel supplies rationed by as much as 10- 50%,” he said in a mid-October news release. “The cardlock privileges for all new accounts were suspended by at least one oil company, and the hours that cardlock service was being made available to existing customers were being restricted. We were being told that things would not be returning to normal for at least several weeks, if not for the rest of October and November.”

Given the current economic fragility, this is something Canada can ill afford, added Bradley, since the trucking industry is being put in the “unenviable and untenable” position of deciding which of its customers will be guaranteed service and which will not.

“How could this happen?” asked Bradley. “It is our understanding that this situation is a reflection of both planned and unplanned refinery outages in the region. The Petro- Canada refinery in Edmonton had been closed for over a month for planned maintenance. However, the company conceded that it was caught off-guard by an unexpected jump in demand. It was also being reported that difficulties restarting the refinery were being experienced. The Suncor plant in northern Alberta had been down since August due to an equipment problem. Imperial Oil had reduced production while it makes repairs at its Edmonton refinery. Problems at other refineries had also been reported.”

This is not the first time parts of the country have experienced significant shortages of commercial-grade diesel fuel, noted Bradley.

In February, 2007, the Ontario trucking industry suffered an acute shortage of diesel fuel that came “perilously close to a full-blown economic crisis.”

Western Canada also experienced a shortage last spring, though not as serious as the current situation, he added. “In each case, refinery issues were the cause or at least major contributing factors,” stated the CTA CEO.

Bradley suggested that the time has come for the Canadian trucking industry, and the government of Canada, and the Canadian Petroleum Producers Institute (CPPI),to sit down and seek answers to this ongoing problem.

According to a spokesperson for Petro-Canada, the fuel producer has been dealing with a planned shutdown at its Edmonton refinery, which was scheduled to begin mid- August, and publicized a year ago to other producers in Alberta -a situation which may have been misinterpreted.

“The industry would call it a turnaround, but it really is a planned shutdown,” said Sneh Seetal. “The shutdown for the Edmonton refinery was to hook up some large equipment because that facility has been reconfigured to take an oilsands diet, as opposed to the conventional crude that it was processing before.”

Otherwise diesel supply in western Canada is currently “tight,” added Seetal, a situation brought on by industry supply issues.

“For example, there have been some unplanned outages in the industry in western Canada, that have reduced the availability of supply. In addition, for Petro-Can, it largely was a demand issue, because there has been an unexpected increase in demand, based on our historical records and current estimates.”

Seetal indicated that demand for diesel has been increasing steadily, primarily because there has been some significant growth in the industrial sector in western Canada.

As a result, there was an unexpected increase in demand for Petro-Canada, based on what customers may have used historically, and what it estimates would be required in the future.

In preparation for the shutdown, Petro-Canada built up inventory and made some third-party supply arrangements to serve its customers, according to the spokesperson. However, some of those third-party supply arrangements fell through, as a result of unplanned outages. Otherwise Petro-Canada’s shutdown shouldn’t have been noticeable to the industry, stated Seetal, because Petro-Canada had made “appropriate arrangements and contingency plans” to provide product.

The Petro-Canada refinery is now in a planned start-up, and the company is bringing that plant back into production. However, as it is a newly reconfigured facility, it’s going to take some time since there are a number of new units or revamped units, said Seetal. “Anytime you start a large facility, it’s a complex, lengthy process. It’s not like it will be something that will happen overnight.”

Petro-Canada has a three-part plan for that execution, which involves: continuing to bring in product from outside the region;focusing distribution on the larger, more efficient Petro-Pass sites, which is affecting large commercial custom
ers.

“The reason we’re focusing distribution on the larger, more efficient sites, is it enables us to serve a greater network of customers,” explained Seetal.

The final step in that Petro-Canada plan is managing how much and when customers can fill up, so as to spread out what diesel is available among more customers, and also aid in their ability to replenish inventory at the respective Petro-Pass sites, a strategy that appears to be effective, according to Seetal.

“We are seeing some traction in terms of getting product into the market and meeting some customers’ needs. But definitely, as a retail organizer, we recognize the value of a customer, and that’s why we’re communicating with our customers frequently so that they know what’s happening, and what to expect.”

A fuel producer that did have an unplanned shutdown is Suncor Energy. Shawn Davis, a spokesperson located at the Calgary-based head office, emphasized that SunCor’s situation is just “one of the pieces of the puzzle” that’s gone into the recent diesel shortage.

“There are certainly other contributing factors,” she said in reference to other producer shutdowns which were related to maintenance. “So it just kind of all came together at once, unfortunately.”

Davis said that Suncor had a breakdown on Sept. 2 at its oilsands upgrader located north of Fort Mc- Murray, Alta., but the repairs to its hydrogen plant’s “hydrotreater” are now complete. She said that Suncor has off-road spec’ diesel being sold now in both Edmonton and Fort McMurray, and its on-road diesel is being put into inventory, via the pipeline. “So, as soon as it reaches the terminal, where it can be sold to customers, it will start being sold and we anticipate that to be Nov. 1.”

Imperial Oil also had a “required maintenance” program, which caused a shutdown at its Strathcona refinery in Edmonton, a situation which exacerbated the recent diesel shortage problem. Work there began Oct. 17, and was expected to last “a period of weeks” according to Imperial spokesman, Jon Harding.

Imperial has experienced continuing strong demand driven by the solid economic growth it has experienced in western Canada, said Harding. He noted there was already a situation of tight supply, given the industry turnaround and given the high demand. “We regret any inconvenience and appreciate the patience and understanding of customers,” added Harding.

Like Alberta, and similar reports from Manitoba, the Saskatchewan Trucking Association is feeling pressured by a low supply of fuel. Al Rosseker, executive director of the STA, has heard sporadic anecdotal reports of cardlocks in Manitoba running dry, and other cardlock systems operating at reduced hours.

“We had some of our carriers phoned on two hours notice (and less) saying that you’re going to be impacted by a fuel shortage. These are from the producers phoning them. It basically gives our carriers enough time to phone the shippers and other customers, to say ‘Your load is not going to be there on time.’ It’s not good.”

The B. C. Trucking Association has reported that B. C. carriers in communities from Dawson Creek, Fort St. John, Fort Nelson, Chetwynd, Terrace and Kitimat have all felt the pinch, given that Northern B. C. gets its diesel from Alberta suppliers. However, the BCTA reports that B. C.’s Lower Mainland and Vancouver Island has remained unscathed, because these regions are supplied by the marine terminal in Vancouver. The CTA has recently informed its members that there has been a telephone meeting with CPPI. A discussion was held about the necessity of regular communication among oil companies, CPPI and CTA, in particular on the current shortage of fuel, and as an ongoing preventative strategy in general. •

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‘Carriers were seeing their fuel supplies rationed by as much as 10-50%.’

David Bradley, CTA