Alberta government backs Edmonton area upgrader

Gary Park

For Petroleum News

The Alberta government is plunging ahead with its support for the high-value business of upgrading and refining oil sands bitumen by contributing some of its own royalties in kind to a C$5 billion refinery in the Edmonton area.

Under an agreement with North West Upgrading and Canadian Natural Resources, it will supply 37,500 barrels per day of bitumen to North West’s planned independent merchant upgrader, which will use a gasification technology to turn feedstock into synthetic crude for refining into jet fuel and gasoline.

About half of the facility’s output will be a low-sulfur diesel, initially about 5.5 million liters per day, with other products including diluents, naphtha and natural gas liquids.

In a separate, but related deal, the province agreed to provide C$495 million over the next decade to Enhance Energy to build a 145-mile pipeline from the upgrader to carry 3,000 metric tons per day of carbon dioxide generated at the plant to enhanced oil recovery projects in central Alberta.

That is projected to produce an additional 1.4 billion barrels of oil from conventional reservoirs.

“Conservatively, we believe the long-term economics of this project are positive,” said Energy Minister Ron Liepert, defending the government’s attempt to keep more of the value-added end of its bitumen extraction in Alberta. “We are embarking on a new era and both projects are of strategic importance for us.”

The upgrader, which is scheduled for commissioning by mid-2014, is expected to involve C$15 billion of investment over three phases by 2025, said North West Chairman Ian MacGregor.

In addition to the government’s 37,500 bpd, Canadian Natural will supply 12,500 bpd of bitumen from its oil sands operations.

Alberta Premier Ed Stelmach, who has spearheaded the effort, said the venture is risky “but we have never shied away from taking bold steps.”

He said the expanding presence of Asian companies in the oil sands is changing Alberta’s view of the oil sands, which he described as “an immense resource from both global energy security and geopolitical perspectives.”

Stelmach said the U.S. population of 300 million will not sustain the “quality of life” in Alberta, so the province needs to “move into markets with a billion population.”

To that end, Alberta will support Enbridge’s struggle to gain approval for its Northern Gateway project, while the U.S., if it stands in the way of pipelines from Alberta, “can take our bitumen on rails.”