The refineries that dot the coast represent a major new market that could fuel the expansion of Canada's oil sands producers, as well as a major pipeline player. And indeed, on the surface, growth appears to be the order of the day. But after a brief golden age, there is a growing fear along refiners' alley that the bubble has burst.


In the muddy fields adjacent to Motiva Enterprises LLC's sprawling Port Arthur refinery, teams of contractors toil on stainless steel vessels and refining modules that resemble so many giant Lego pieces, all waiting for assembly in a $7-billion (U.S.) expansion of the plant.

Motiva – a joint venture between Royal Dutch Shell PLC and state-owned Saudi Aramco – is doubling its refining capacity to 600,000 barrels a day. The site will also add a coker so it can process the heavy grades of crude, such as bitumen from Canada's oil sands, that make up a growing share of the world's oil supply.

Because the U.S. is the only export market for Canadian crude, expanded U.S. refineries like Motiva's are key to Alberta's ambitions to double, or even triple, oil sands production over the next decade.

But here's the catch. The Motiva refinery is proceeding only because the company, after weighing discouraging trends in the market, decided not to kill it.

“In general, the outlook for total refining capacity in the U.S. is downward pressure,” says Motiva's chief executive officer, Robert Pease.