Irving refinery scored 'free' oil from historic price collapse, according to Higgs

Company mum but premier says a tanker with free oil from an April market crash unloaded in Saint John in May

Robert Jones · CBC News · Posted: Jun 08, 2020 6:00 AM AT

Premier Blaine Higgs spent most of his career with Irving Oil and told a business podcast in May the company cashed in on unprecedented negative crude oil prices in April. (Stephen MacGillivray /Canadian Press)

It was the darkest of days for Canadian oil producers in April when western crude prices freakishly dropped below $0 per barrel, but it was a windfall for buyers and Irving Oil Ltd. jumped on it, according to New Brunswick Premier Blaine Higgs.

"I worked in the refinery for many years and apparently in the last month there was actually a free load of crude oil that came through the Panama Canal," said Higgs, while speaking remotely to a business audience two weeks ago.

"Now they had to pay transportation, but imagine negative cost for crude."
Irving Oil has not confirmed the story and did not respond to an email inquiry asking for information about it.

But in April a series of market events mostly in the U.S. culminated with holders of futures contracts of West Texas Intermediate (WTI) crude oil, offering product they were obliged to accept delivery of in May for free, or less.

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At the market low point on April 20, sellers of contracts that were timed to lock in on April 21 were offering to pay more than $30 per barrel to anyone willing to accept deliveries of crude oil tied to the contracts that were coming in May and had no where to go.

"They have to pay you to take their oil, which was up to $35 per barrel. It was just an interesting point in history," U.S. billionaire Carl Icahn told Bloomberg News about deals he made for his own refinery during the April giveaway.

"It was really fascinating. You'll never see anything like that in history again I don't believe."

An unidentified tanker full of 'free' oil made its way to New Brunswick's Irving Oil refinery sometime last month through the Panama Canal, according Premier Blaine Higgs. (Marcelo del Pozo/Bloomberg)

Traders were caught by a collapse in demand for oil caused by sudden COVID-19 economic shutdowns that began unexpectedly in March.

A worldwide glut of crude had been building for months prior to the pandemic and on-land oil storage facilities around the globe were already near capacity. Across the world's oceans fleets of tankers filled with oil were also being paid to float around and wait for buyers.

It was all a disaster for investors who owned those April futures contracts which required holders to accept the receipt of crude deliveries in May but for which there was no market.

Prices for West Texas crude dropped to a historic low of minus $37.63 per barrel on April 20 as speculators tried to unload futures contracts that required delivery of product in May. (Jeff McIntosh/The Canadian Press)

The result was negative prices that shocked an already battered industry.

Brian Schmidt, president of Calgary oil producer Tamarack Valley Energy told CBC News at the time it was hard to take.

"These are very difficult days and yeah, I looked at that board today and saw that negative number and thought, this is crazy," said Schmidt.

But for those able to accept delivery of oil, it was the opposite — a historic windfall.

Irving Oil's refinery in Canada's largest and can process 320,000 barrels daily. Company traders scour the world for deals on oil but in 60 years had never gotten it for free, according to Premier Blaine Higgs. (Devaan Ingraham/Reuters)

Irving Oil has six million barrels of storage capacity at an onshore tank farm next to its deep water oil tanker offloading facility at Canaport in Saint John.

That's about an 18-day supply for its nearby refinery when operating at full production, although how much of that space could have been freed up to take advantage of negative prices is unknown.

According to Port Saint John records, 11 tankers carrying crude oil with capacities between 500,000 and two million barrels have unloaded at the Canaport terminal since the end of April, although which of those Higgs was referring to, if any, is a mystery.

A pumpjack pulls oil out of the ground in central Alberta. Western Canadian oil usually trades for less than West Texas crude, which sold for less than $0 in April. (Kyle Bakx/CBC)

Higgs said since the refinery was commissioned in 1960, it had never accessed cheaper product.

"That was not something imaginable when the refinery was built 59 years ago — that it would ever be free," he said.

Oil tankers from around the world unload regularly through an underwater piping system at Irving Oil's six-million barrel Canaport tank farm in Saint John. (Irving Oil/Twitter)

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108 Comments

David Amos
"Irving Oil has not confirmed the story and did not respond to an email inquiry asking for information about it"

Surprise Surprise Surprise

Ray Oliver
Reply to @David Amos: Why would they have to say anything? What is wrong with a tanker of free oil? Is that a crime? No it's a great deal swung by a private company who has thrived by searching out great situations to turn profit. It's called BUSINESS!

David Amos
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Methinks I struck a nerve again N'esy Pas?

David Amos

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Methinks Higgy's buddies in Vestcor may be nervous campers today just as as the dudes playing with our CPP funds certainly should be N'esy Pas?

David Amos

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Methinks we all should enjoy Higgy's circus when it begins again tomorrow N'esy Pas?

Fred Brewer
So Irving gets free oil but we won't see a penny of reduced prices at the pump.
All profits end up in Bermuda.

Terry Tibbs

Reply to @Fred Brewer:
Ah Fred, surely you see the humour in this?
The Great and Wise Higgs expects us peons to get in line, wear our masks, work for crap wages, pay our taxes, buy New Brunswick goods and services, and vote for him.
Those he idolizes do none of those things.

JoeBrown

Reply to @Fred Brewer: Were you part of the deal, otherwise how do you know the effect?

David Amos
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Reply to @Terry Tibbs: Methinks we all should enjoy Higgy's circus when it begins again tomorrow N'esy Pas?

Fred Brewer

Reply to @JoeBrown: I don't know the deal but I don't have to; I know how the empire works as do most of us.

Fred Brewer

Reply to @Terry Tibbs: I see absolutely nothing funny about taxes that our government should be collecting, going to a tax-free haven in Bermuda. When will someone put a stop this lunacy? We are circling the drain while one of the richest families in Canada pays little or no taxes.

Samual Johnston

Reply to @Fred Brewer: part of the problem is people thinking it has anything to do with the Irving family. It is way bigger than them it is a global mindset where the richest of the rich are given loop holes by governments as in incentive to keep them investing in their country....city..region, etc. I'd like to see them pay some more as well but I do not condemn them for doing what they can to keep as much as they can. We all do that same and corporations around that world all do the same. When you target just one person or just one company it just comes off as petty hate or jealousy even if you have the greater good in mind.

Terry Tibbs
Reply to @Fred Brewer:
Sure it's funny.
You too could be on this gravy train yourself, you just need a big enough bankroll to get it going, isn't everything in what we call life just the same?

Fred Brewer

Reply to @Terry Tibbs: You would need a bankroll bigger than Irving's. The empire has a nasty habit of crushing competition.

David Raymond Amos Round 3

Monday 8 June 2020