Providing coverage of Alaska and northern Canada's oil and gas industry
November 2016

Vol. 21, No. 48 Week of November 27, 2016

British Columbia refinery idea suspended


For Petroleum News

The four-year-old dream of a North American newspaper tycoon to build a refinery on the British Columbia coast and ship diesel, jet fuel and gasoline to Asia shows signs of being jolted awake.

Less than a month after formally embarking on an environmental review of his US$22 billion proposal, David Black has suspended the process, admitting he is unable to pay the cost of the regulatory phase.

He told Postmedia his only remaining hope is to strike a deal with communities in British Columbia and First Nations to become partners in Kitimat Clean project by helping to pay for the C$5 million regulatory phase by the Canadian Environmental Assessment Agency.

“Until I get that we’re just nowhere,” he said, while dangling a thread of hope that an accord might be reached within three months.

For now the CEAA has suspended the work of a panel it appointed on Sept. 2 and given no indication when that work might resume.

Loan guarantee sought

Separate from the review, Black has been seeking a C$10 billion loan guarantee from the Canadian government, arguing his project offers a cleaner alternative to exporting raw bitumen from the Alberta oil sands through British Columbia ports.

The idea has been welcomed by British Columbia Premier Christy Clark as a chance to create more jobs than merely delivering the bitumen by pipeline to tanker terminals.

Officials from the B.C. and Canadian governments have also used trade missions to Asia to seek investors in Kitimat Clean and buyers for the refined products.

Black has offered no updated reports on his attempts to negotiate loans or arrange for Asian customers.

Shipment by rail

The Kitimat Clean proposal includes the use of rail rather than a pipeline to ship about 400,000 barrels per day of bitumen out of Alberta and a technology to reduce carbon emissions at the refinery and pose less of a threat to the environment than a spill involving bitumen.

However, from the outset Black has encountered strong doubts that he could overcome the notoriously thin profit margins for refined products.

In addition, Michael Moore, a professor of energy economics at the University of Calgary, has argued that any Asian buyers would prefer to build their own refineries and meet their specialized needs.

Other timeouts

Also appearing to have taken a timeout are two other proposals to access Asian markets with Alberta bitumen - Pacific Future Energy, which has filed plans with federal and provincial regulators for an C$11 billion, 200,000 bpd plant and tanker terminal near Kitimat, and a First Nations-based venture by Eagle Spirit Energy to convert 1 million bpd of bitumen at an unidentified location on the British Columbia coast.

In addition, a partnership that has involved some First Nations has been exploring the idea of building a C$34 billion rail and pipeline link from Alberta to the Port of Valdez.

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