|
Alberta rejects Native plan Provincial government won’t provide feedstock for aboriginal-owned bitumen upgrader; won’t extend commitment beyond current project Gary Park For Petroleum News
The Alberta government has decided there are limits to its long-held goal of upgrading and refining more oil sands bitumen within the province to create jobs and pump more revenues into the provincial economy.
In an abrupt move, it has reversed earlier support for a proposed C$6.6 billion aboriginal-owned bitumen refinery, derailing four years of negotiations with the Alberta First Nations Energy Centre or AFNEC, representing 48 First Nations.
Despite recent polls indicating that 80 percent of Albertans want to see more upgrading and refining take place in Alberta and its own ambition to see two-thirds of raw bitumen processed in the province, the government has backed away from providing feedstock for the plan to handle 93,000 barrels of bitumen per day.
Energy Minister Ted Morton, who was appointed to the portfolio only five months ago, concluded the project was not a safe investment after giving the matter “due consideration.”
“When we got into office (under newly elected Premier Alison Redford) and looked hard at the economics, we were not convinced that the risk-benefit ratio was appropriate, particularly because we are already committed to a significant upgrader project,” he said. “Our immediate objective is to ensure the success of North West, to see how that goes and then move on from there rather than jump into a second upgrader deal right away.”
Refinery site needed A government spokesman said the AFNEC needs to secure a refinery site, a third-party partner and more front-end funding, otherwise “the deal is off the table and we’re no longer entertaining it.”
Another spokesman said Morton was “not satisfied” the proposal was on a par with a scheme by North West Upgrading, which is involved with Canadian Natural Resources in developing a C$5 billion refinery near Edmonton to use a gasification technology to turn 75,000 bpd of bitumen into synthetic crude for later refining into jet fuel and gasoline, including low-sulfur diesel.
Former energy minister Ron Liepert said a year ago Alberta believed the long-term economics of the North West project were “positive.”
The upgrader is scheduled for commissioning by mid-2014 and expected to see two further phase developments for a total investment of C$15 billion by 2025.
But many analysts and industry leaders have argued the risks of entering the refining business are too great to justify the government’s decision to initially contribute 37,500 bpd of bitumen from its royalty-in-kind program, or BRIK, to North West.
They argue there is no guarantee that Alberta will reap the employment and economic rewards it has forecast, suggesting Alberta is far better off shipping raw bitumen to the United States and Asia.
Issue over commitment AFNEC’s owners had a “conditional commitment agreement” for Alberta to provide bitumen feedstock for their upgrader, according to Ken Horn, president of Teedrum, an investor group partnered with AFNEC, but the government refutes that claim, saying negotiations never reached that point.
However, Horn said AFNEC has sent representatives to Asia to seek partners who might be interested in joining the project without the security of BRIK barrels.
He said Sinopec, China’s largest petrochemical company which has minor stakes in the Alberta oil sands, and the China National Technical Import and Export Corp. have shown interest, while Engineers India Ltd. has spent about C$25 million studying the project with the possibility of turning its investment into equity.
In their disappointment, some First Nations leaders have walked out of discussions with the Alberta government, while Eric Newell, former chief executive officer of the Syncrude Canada oil sands consortium, resigned as AFNEC chairman after the negotiations collapsed.
He said he accepted the chairman’s job at no salary because he saw it as a “great way to bring First Nations people to the table as a full partner in resource development.”
Revenues and jobs AFNEC estimated the upgrader would pump about C$150 million a year over 30 years into First Nations to help fund health, education and other services on reservations and provide skilled jobs.
Two months ago, Prime Minister Stephen Harper told 400 First Nations chiefs it was in the interest of all Canadians to have an educated, skilled and employed aboriginal workforce because the Native communities were the youngest and fastest growing in Canada.
Treaty 7 Grand Chief Charles Weaselhead said First Nations require more business opportunities to “enjoy some of the wealth that Alberta has created through the oil sands and the oil boom. There needs to be a new chapter for us to succeed and be sustainable.”
The opposition Liberal Party in Alberta has called for the province’s ethics commissioner to investigate “the sudden reversal” of the government’s position on the upgrader.
| 