Irving shelves 2nd Saint John refinery

Irving Oil Ltd. and BP have halted plans to build a second oil refineryjust outside ofSaint John, officials announced on Friday.

Kevin Scott, Irving Oil's commercial director of refining growth, announced the decisionabout thesecond refinery projectat a Saint John news conference.

A study conducted by Irving Oil and the international oil giant over the past 18 months concluded that the project was not viable during the economic downturn and the softening demandfor petroleum products.

"We did everything possible to understand how we might continue with this project under the extremely challenging circumstances in which we find ourselves," Scott said.

"Despite those best efforts, we've recently come to the very difficult decision that Eider Rock, as we envisioned it, at the scale and the timeline that we studied, is not possible at this time."

Kenneth Irving, the president of Irving Oil, said the company will work to maintain the competitiveness of the existing oil refinery in the city.

Irving Oil had partnered with BP to build the $8-billion project, which is known asEider Rock,and construction was supposed to start in 2011. At its peak, the refinery project was to create 5,000 construction jobs and 1,000 permanent jobs.

"It became clear, particularly over the past year, that the market conditions for refining have changed since BP and Irving Oil entered this memorandum of understanding," said Iain Conn, chief executive of BP's refining and marketing business in a statement.

Premier Shawn Graham said he's disappointed to hear the refinery project is being abandoned but he said the decision appeared to be inevitable.

"We understand the rationale today, as we know 80per centof the global refinery projects have been put on hold or cancelled," he said.

"Irving Oil was working hard with British Petroleum to secure a significant investment for this project but global economics have changed significantly over the past two years."

Graham said the province has still achieved some success in positioning itself as an energy hub in eastern North America. He points to the new Canaport LNG terminal that just opened in Saint John.

The premier said there are other energy projects the province is looking at such as wind power, solar and tidal.

Delay announced in November

Irving Oilannounced in November that it was going to break the refinery construction into two phases and extend the completion timeline to eight years from four.

The first phase would produce half the intended amount of oil a day, 150,000 barrels. The company's existing refinery processes 300,000 barrels of oil per day and is the largest in Canada. The company is also considering producing more diesel.

The company said the delay was due to a labour shortage in the area as well as global competition, rising capital costs and limited availability of material.