Glitch at Petro-Can's Edmonton refinery leads to gas shortages in Alta., B.C.

CALGARY - In the latest snag to hit Canada's refining industry in the past year, Petro-Canada (TSX:PCA) said of some of its stations in Alberta and the B.C. Interior are running out of gasoline because of problems at its Edmonton refinery.

The refinery's catalytic cracking unit - or "cat cracker" - had to be shut down last week, which has limited the supply of gasoline coming out of the facility, the Calgary-based company said Tuesday.

"That's kind of the finishing unit for gas at the plant. It's kind of like running a doughnut factory without a deep fryer. We just can't produce product right now," Petro-Canada spokesman Jon Hamilton said in an interview.

About a dozen stations throughout Alberta and B.C. had all zeros on their price signs to inform customers they had run dry.

The Calgary-based integrated petroleum producer, refiner and retailer said it is working on fixing the problem and making sure that the gasoline that is available in the region is distributed as equitably as possible.

"Our customers will likely notice some of our sites will run out of gasoline temporarily. Gasoline is still being delivered, but there will be, for Petro-Canada customers, an inconvenience factor," Hamilton said.

"The gasoline will be available at other Petro-Canada sites. It just might not be available where you normally fill up."

The irony of empty gasoline stations in oil-rich Alberta was not lost on customers attempting to fill up at one gas station in Northeast Calgary.

"It's really strange. We live in a land where we produce a lot of oil," said George Mendez, who was running late for his shift at the airport because he could not find anywhere to fill up his red SUV.

"I have to look around for gas or else I walk to work."

Roop Singh, whose family owns the Calgary station that was out of gas, said all he can really do is apologize to customers until he gets a new shipment next week.

"We cannot do anything because it's Petro-Canada's decision," he said.

The shortage does not affect supplies of diesel or jet fuel in Western Canada.

Over the past year, other companies have dealt with problems similar to the one announced by Petro-Canada Tuesday.

In March, a shut down at Imperial's 187,000-barrel-a-day Strathcona refinery near Edmonton caused gasoline shortages at Esso stations throughout Alberta, Saskatchewan, B.C. and Manitoba.

Around the same time, Shell Canada Ltd. said its Scotford refinery and upgrader near Fort Saskatchewan, Alta., were operating at reduced rates because of unplanned maintenance.

Last year, Ontarians experienced gasoline shortages for several weeks after a fire at Imperial's Nanticoke refinery.

Canada's refining infrastructure is aging, but companies are not keen on investing in new facilities, said Roger McKnight, an energy analyst with Oshawa, Ont.-based consulting firm En-Pro.

Not only would it would take up to 10 years and billions of dollars to build a new refinery, but they would tilt the market against the companies' favour.

"Their refining margins would drop because of excess supply. So there's no incentive at all for them to do that," McKnight said.

Another factor discouraging the industry from spending money on new refineries is uncertainty about government regulations.

"If I was an oil company, I would like to know in 10 years, when I'm going to have this refinery built, what the eventual specs are going to be and what the emission standards are going to be," McKnight said.

"So basically they just stand pat."

Before announcing its supply issues Tuesday, Petro-Canada had started a planned 60-day shutdown at the refinery to install new equipment that will allow the facility to process oilsands crude. That procedure is not related to the current problems.

Until the cracking unit is up and running again, Petro-Canada said it is taking steps to minimize the inconvenience to customers.

"We'd rather just be putting gasoline in the ground and letting our customers fill up their tanks. But we're in a situation where we don't have the volume of gasoline that we normally do," Hamilton said.

Petro-Canada is working through its supply channels to take the pressure off stations in Alberta and the B.C. Interior.

"We're getting our hands on any trucks we can to source product internationally and locally," Hamilton said.

Since the areas affected by the shortage are land-locked, it will take some time to transport gasoline by truck from Vancouver, Hamilton said.

Independent gas stations that buy their gasoline from Petro-Canada will be serviced before the company's own sites, Hamilton said.

Stations that provide fuel to essential services are also being made a priority, he added.

Petro-Canada shares closed down 38 cents at $46.02 on the Toronto Stock Exchange Tuesday.