Come By Chance Refinery Samples New Crude

Canada's Come By Chance refinery, located on the eastern island of Newfoundland, is for the first time buying domestic crude pumped from fields only a few hundred miles offshore, marking the latest addition to its increasingly versatile slate.

The 115,000 barrel-per-day refinery recently began taking deliveries of White Rose crude, a refinery spokeswoman confirmed. Until now, the relatively medium-sweet variety has been a stranger to the refinery, despite its close proximity in the northern Atlantic Ocean.

The first cargo was shipped in December, according to Husky Energy (HUSKF), which operates the fields that make up the roughly 45,000 bpd White Rose stream. At least four other vessels followed in April and May, passing briefly through the Whiffen Head terminal to a refinery dock about a mile away, according to vessel tracking data available on ThomsonReuters' Eikon.
          
Although the field has been pumping oil for a decade, most of the crude has been shipped to refiners on the U.S. East coast eager for nearby medium-sweet oil, with Phillips 66's  Bayway refinery in New Jersey the largest buyer, according to U.S. Energy Information Administration data. Some also goes elsewhere in Canada and to Europe.

Come By Chance, run in recent years by an upstream Canadian oil venture and the South Korean state oil firm, had shunned White Rose in favor of longer-distance grades closer to the sour varieties it was mainly built to consume.

The deliveries are the latest sign of a new approach to crude supply by the new owners. It is also part of a flux in global crude supply routes, which have been tangled by the growth of production from U.S. shale fields.

"They have become a merchant refinery," said Ed Hirs, an energy economist at the University of Houston, referring to a type of freewheeling refinery that has no fixed supply or market.
          
WALL ST PIVOT
The refinery was purchased in November by New York-based SilverRange, run by Neal Shear, former top commodities banker at Morgan Stanley (MS), and ex-Lehman Brothers executive Kaushik Amin. The team negotiated a new supply and offtake agreement with BP Plc and overhauled operational management at the site.

They also swapped a diet of Iraqi crude oil for shale oil out of Texas. The shale oil is not a perfect fit for the refinery, which prefers a medium-sour grade, but the owners are willing to run at slightly reduced rates to take advantage of the competitive pricing for U.S. crude oil, according to a person familiar with the facility's operations.

The same goes for White Rose. It's not a perfect fit, and the owners are blending it with other grades as part of the ongoing tinkering with the crude slate, the person said.

The White Rose oil fields, first tapped in 2005, are a joint project between Husky Energy, Suncor Energy Inc and the Newfoundland and Labrador provincial government.

Colleen McConnell, the Husky spokeswoman, said the firm has sold more cargoes this year, but declined to say how many.

Gloria Warren-Slade, a refinery spokeswoman, said, "the refinery runs different crudes from time to time, and White Rose happens to be one of them this time."

Oil fields off the coast of Newfoundland also produce Hibernia and Terra Nova crude as part of joint projects that include Exxon Mobil Corp, Chevron Corp, Murphy Oil Corp and Petro-Canada.

Combined, these oil fields sent an average of 100,000 bpd to the U.S. in 2014, making up the lion's share of the exports, according to Canadian customs information. In the first quarter of this year, as Come By Chance began accepting White Rose crude, non-U.S. exports have been on the decline, data shows.

Reporting By Jarrett Renshaw