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Husky May Expand Downstream

Chevron refinery sale in B.C. could offer opportunity
CALGARY, Alberta -- Husky Energy Inc. may look to expand its downstream presence in British Columbia if Chevron Corp. winds up selling a 75-year-old Vancouver-area refinery as it reviews underperforming assets, an energy consultant said, according to a report by Oilweek.

Calgary, Alberta -based Husky already has a small 12,000-barrel-per-day refinery in Prince George, B.C., which provides fuel to the north and central portion of the province. Chevron runs the province's other refinery in Burnaby, B.C., just to the east of Vancouver.

Chevron said last week [image-nocss] its fourth-quarter profits fell 37%, with the biggest hit taking place in its refining business, in which it lost $613 million (U.S.) compared to a profit of $2 billion in the same 2008 period.

In January, Chevron said it would make cuts to its refining business, but had no specifics about where the reductions would take place or how many jobs would be affected. (Click here for previous CSP Daily News coverage.) At the time, a spokesperson for the Burnaby refinery said no announcement had been made about the fate of that site.

But Roger McKnight, a senior petroleum adviser for Oshawa, Ontario-based En-Pro International, said Thursday he does not see the Burnaby refinery fitting in with Chevron's long-term plans. Chevron also has a chain of 106 gas stations in British Columbia.

"If Husky were to bite the bullet and buy the Burnaby refinery, it would certainly give them a stranglehold on the B.C. market," McKnight told Oilweek.

It may also give Husky more to offer in terms of exchange agreements, in which companies buy fuel from one another to cover off regions where they have no refining capacity, said the report.

Husky grew its downstream presence late last year by buying 98 gas stations in Ontario from Suncor Energy Inc. Suncor was required to divest some of its downstream assets as one of the Competition Bureau's conditions for allowing the company to merge with Petro-Canada last August. (Click here for previous coverage.)

Late Wednesday, Husky said it earned $320 million or 38 cents per diluted share in the quarter ended December 31 compared with a profit of $231 million or 27 cents per diluted share in the same period of 2008. Sales and operating revenues, net of royalties, were $3.61 billion, compared with $4.70 billion a year earlier.

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