Petro-Canada joins upgrader-building parade

Synenco Energy and North West Upgrading will also process north Albertan raw bitumen; Total adding to Deer Creek Operation

Gary Park

For Petroleum News

Petro-Canada has shrugged off worries about Western Canada’s construction labor crunch and added its name to the list of those building upgraders to process raw bitumen from northern Alberta.

The company has opted for a site in the refinery area 25 miles northeast of Edmonton rather than near its Fort Hills mine site being developed with minority partners UTS Energy and Teck Cominco.

First production from Fort Hills is scheduled for 2011 and targeted at 190,000 barrels per day by 2014.

A budget for the upgrader won’t be known until preliminary engineering is completed later this year.

Petro-Canada is the third company in recent weeks to announce upgrader plans for the Edmonton region, following Synenco Energy and North West Upgrading, both of whom are pressing ahead with plans for turning bitumen into refinery ready crude.

In December, Synenco said its C$5.3 billion Northern Lights project, being developed with China’s Sinopec as a 40 percent partner, will include an upgrading facility, while North West announced Jan. 30 that it has filed with Alberta regulators to build a C$4.8 billion heavy oil upgrader.

The North West venture hopes to start operating in 2010 and grow in three phases over the next five years to handle 231,000 barrels per day of feedstock, producing 180,000 bpd of synthetic oil and 42,000 bpd of condensate.

Brant Sangster, Petro-Canada’s senior vice president for oil sands, said the Edmonton area is ideal because it is “near established infrastructure, markets and a workforce.”

“There’s nowhere in Canada where you won’t find labor constraints over the next five to 10 years,” he told a conference call.

Despite Imperial Oil’s pre-Christmas decision to shelve plans for an upgrader linked to its Kearl oil sands megaproject, scared off by high inflation and high costs, Petro-Canada and Synenco are not alone in pressing ahead with upgraders.

France’s Total said it is likely to add a US$5 billion plant to its US$4 billion Deer Creek operation, which could be producing 200,000 bpd within a decade, and its joint venture at Surmont with ConocoPhillips.

Jean-Luc Guiziou, president of Total’s Canadian unit, said that developing downstream integration is essential to protect producers against low bitumen prices.

Some of the changing upgrader economics have been outlined by BA Energy, which is building the Heartland upgrader.

Using proprietary technology, BA has estimated capital costs for the C$800 million facility — to be constructed in three phases of about 75,000 bpd each — at C$14,000 per barrel of daily upgraded product and operating costs of C$2-$3 per barrel, based on mid-2004 projections.

Although those numbers have likely increased because of inflation and rising costs, BA President Ray Cej said they are still far short of the average upgrading cost of C$30,000-$35,000 per barrel.

Half of the cost differential has been reduced by eliminating hydrogen processing and the rest by implementing “very efficient” processing systems.