|
Refinery idea fuels debate Kitimat scheme attracts second thoughts after initial opposition; industry spokesman says decision should be on economics, financing By Gary Park For Petroleum News
British Columbia newspaper owner David Black has a long and mostly successful record of operating against the grain.
He has pocketed millions from building a stable of more than 150 community publications in Canada and the United States when the rest of the world said the business was dying.
Now he’s trying to raise C$13 billion to build a refinery at Kitimat on the British Columbia coast almost 30 years after the last refinery was built in Canada and over a period when more than 20 plants have been closed and more than 60 sit idle on the U.S. Gulf Coast.
Compounding Black’s challenges, the common wisdom holds that it is more profitable for Canadian crude producers to export rather than refine their raw product.
Most fuel destined for Asia As outlined, the refinery would produce 240,000 barrels per day of diesel, 100,000 bpd of gasoline and 50,000 bpd of kerosene or aviation fuel, from 550,000 bpd of diluted oil sands bitumen, with the diluents being stripped and returned to Alberta for blending with bitumen to aid pipeline transportation. Most of the fuel would be destined for Asian markets. Based on the necessary approvals, construction would start in 2014 and take six years.
If built, the refinery would far surpass Canada’s current largest refinery — Irving Oil’s 300,000 bpd plant at Saint John, New Brunswick.
Black estimated revenues would total in the order of C$22 billion a year.
In the three weeks since Black first announced his vision he has been drowned out by a chorus of naysayers, from aboriginal leaders to environmentalists and some industry leaders.
Prospects of jobs, revenues But a quiet counter-movement has also been building, reflected in a Vancouver Sun editorial, which argued that the questions being raised deserve to be aired, that opponents should consider what they would support instead of just saying no to the prospect of jobs and government revenues and that, above all, what Black is proposing does not seek taxpayers’ money.
Greg Stringham, vice president of markets and oil sands with the Canadian Association of Petroleum Producers, said access to new markets for Canadian crude is crucial to the success of the country’s oil and natural gas sectors.
“Broadly speaking (Black’s idea) is an example of several types of potential opportunities that are being evaluated in the context of West Coast oil exports,” he said, identifying the goal as “safe and responsible market access while delivering benefits to British Columbians and Canadians.”
Stringham suggested that the refinery proposal could be decided on economic viability and its ability to attract commercial backing and investors.
Under study for a year In answer to those who dismiss the idea as a piece of fantasy, Black said the refinery concept has been under study for a year, including briefings with various levels of government.
He said a refinery removes the threat of offshore pollution from a heavy crude oil spill, answering the main concern of communities and First Nations in the Kitimat region of a “possible catastrophic disaster at sea.”
“We have discussed the opportunity at length with Enbridge (operator of the Northern Gateway project) and with many of the oil sands producers,” Black said.
“Some partners in Gateway are not in favor of a Kitimat refinery at this time. They remain hopeful they will be allowed to export heavy crude by tanker from Kitimat.”
More synthetic crude an option A global energy expert said earlier this year that if new bitumen pipelines are not built from Alberta to the Pacific coast, Alberta should opt for both new local upgrading projects, to convert bitumen into refinery-ready crude, and increase its capacity to produce its own refined products for export.
Robert Johnson, director of global energy and natural resources for Eurasia Group, said that if Enbridge’s Northern Gateway and Kinder Morgan’s Trans Mountain expansion are both scrapped, the door would be open for Alberta to produce more synthetic crude.
The pressure to find some solutions was reflected in late August when crude oil nominations for the Trans Mountain system for the month of September were oversubscribed by 67 percent.
Total nominations accepted were: 290,485 bpd for the Trans Mountain mainline, 141,001 bpd for the Puget Sound pipeline in Washington state and 78,266 bpd for the Westridge Dock in Vancouver, the bulk likely to be shipped to Asia.
Uncommitted tanker nominations for Westridge were oversubscribed by 81 percent, pointing to the rapidly rising interest in accessing Asia.
| 