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Kitimat refinery deemed viable
Gary Park For Petroleum News
Fast-evolving plans for a crude bitumen refinery on the British Columbia coast have received another shot of adrenalin from a consulting firm which says the facility could be built for far less than current estimates and could generate “incremental long-term economic benefits in Western Canada.”
Chicago-based Navigant Consulting, in a 33-page study commissioned by the British Columbia government, said the refinery could profitably sell fuels in China, India, South Korea and Japan.
Although the consultant conceded it had been provided with “very little detail” supporting cost projections, it said that even Kitimat Clean Fuels’ original C$13 billion figure — since raised to C$16 billion — might be on the high side.
In addition, the proponent has included C$6 billion for a bitumen pipeline from Alberta to the Kitimat terminal, C$2 billion for a pipeline to provide natural gas to power the refinery and C$1 billion for new ocean-going tankers.
Costs have risen However, the study noted that the cost of capital equipment and labor has risen since the baseline figures from 2006 that is used and the remoteness of the Kitimat site would inflate construction costs.
The report said a carefully designed refinery would be “capable of manufacturing fuel products for a myriad of countries around the Pacific Rim” from 550,000 barrels per day of diluted bitumen from the Alberta oil sands.
“The output from Kitimat (of 500,000 bpd) could be accommodated by markets in Asia/Oceania without major disruption to local spot markets,” Navigant said.
A “sophisticated refinery,” with the technology to upgrade heavy crude could also help meet the ongoing import needs of the four Asian countries, whose technical capability to upgrade heavy crudes lags behind the United States, Canada and Western Europe, Navigant said.
MOU on funding Kitimat Clean Fuels President David Black, a Vancouver-based newspaper publisher, has announced a memorandum of understanding from Swiss-based Oppenheimer Investments Group to fund the entire project through debt financing. He has also indicated a decision on whether to embark on regulatory applications could be made by about mid-April.
British Columbia Premier Christy Clark said the Navigant report confirms Black’s belief that the refinery “can be profitable and also be in the interest” of her province.
She suggested the project could also be a “game changer” in the contentious debate over the movement across British Columbia of heavy crude from Alberta by dealing with environmental concerns.
British Columbia Energy Minister Rich Coleman said the Navigant suggestion that the refinery not be tied to any one market strengthens the viability of the proposal.
The government asked Navigant to prepare a technical review of the project, including an estimate of its economic performance and an assessment of its market opportunities.
Large crude tankers not needed “It is Navigant’s opinion that the refinery configuration recommended by Kitimat Clean Fuels is technically sound,” the report said.
“They have suggested using a combination of hydrocracking and delayed coking to process oil sands from Alberta into various clean fuels. This particular configuration (based on Fischer Tropsch processing technology) is well-proven and widely employed in many locations around the world.”
Navigant said the plan to export fuels would eliminate the need for large crude oil tankers, replacing them with smaller vessels that “would, on average, be considerably smaller,” lowering the risks of a major oil spill.
“Since its production could ... be delivered to any of the importing countries around the Pacific Rim, one approach to maximize margin would be to design the refinery to ensure that it can blend finished products to meet the likely specifications in any of these countries.
“Such an approach has been used successfully in many export refineries around the world, particularly in resource-rich countries of the Middle East,” Navigant said.
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