Peace River gets refinery plan, faces suit

Gary Park

For Petroleum News

The Peace River area of northwestern Alberta, seen as the next leg of the province’s oil sands development, has taken one step forward and one back.

Privately owned Bluesky Refining is moving ahead with a C$2.5 billion refinery to open up a new outlet for bitumen, while the Woodland Cree First Nation has filed a lawsuit asking a court to block regulatory approvals of Shell Canada’s plans to expand production at its Carmon Creek project to 100,000 barrels per day from 12,500 bpd.

Bluesky hopes to introduce a 50,000 bpd refinery no later than 2013, allowing the Peace River area to grow from its current pilot plants and field trials to a full-scale producing region, according to Gary Brierley, chief operating officer.

Bluesky aims to turn bitumen into gasoline and ultra low-sulfur diesel rather than following the traditional route of upgrading the raw material into synthetic crude for sale to refineries.

Brierley told the Edmonton Journal the United States’ demand for 2 million bpd of imported gasoline presents an attractive business proposition for Bluesky which will have access to existing and new pipeline connections to markets as far away as the eastern U.S.

The economics of building a full-scale refinery are robust, he suggested, noting that raw bitumen fetches only about 42 percent of prices paid for refinery-ready light oil, while wholesale prices for refined products generate a 30 percent premium over the finest crude.

A bitumen refinery would currently return about C$35 a barrel for raw material and sell its products for C$100, leaving C$65 per barrel to cover construction costs, operating expenses and to make profits.

The company estimates it could build its refinery for C$50,000 per barrel of daily production capacity.

Meanwhile, the Woodland Cree First Nation is going to the Alberta Court of Queen’s Bench with its claim that the Alberta government has failed to properly consult with First Nations communities on oil and gas land sales, with a special emphasis on oil sands developments.

Chief William Whitehead said in a statement that the projects under way in the Peace River area are “taking a heavy toll” on hunting and trapping and concerns are building over the impact on air and water quality.

He said his people do not want to see a repeat of what has occurred in the Athabasca region of northeastern Alberta, which dominates the oil sands sector.

Whitehead is calling for a regional planning process to focus on the cumulative impact of energy development on health, water and wildlife.

Robert Freedman, an attorney for the Woodland Cree, said the suit raises questions about whether Alberta can “continue to sell off lands without talking to First Nations, without talking to the public and not doing anything at a point where concerns about the overall impact of these developments can be addressed.”

Shell Canada is not commenting on the legal action, but will continue consulting with the Woodland Cree, acknowledging that its leases do overlap with traditional aboriginal uses.