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Boost for BC refinery plan MOU from China’s largest bank to organize syndicate of lenders, possibly engineering, construction advice for Kitimat refinery Gary Park For Petroleum News
China’s largest bank has given a major lift to the dreams of newspaper publisher David Black to lead construction of the first new North American refinery in decades.
He signed a memorandum of understanding in Beijing that, if completed, will see the Industrial and Commercial Bank of China act as financial adviser, participate in “associated pipelines and other elements” and provide engineering and construction advice for the possible C$25 billion venture.
Black told reporters that ICBC views its role as “providing a fair amount of money themselves, but also organizing the club of banks that will provide all the debt money. They have the money, but they like to spread risk around like insurance companies.”
ICBC said it was “very pleased to be working toward a comprehensive agreement to finance a refinery in Canada, which is planned to export refined fuels to China and other Asian countries.”
Black said ICBC shares his goal of preferring to see the entire project financed through debt, rather than investors taking a stake in the assets.
No controlling interest He said ICBC has agreed it will not seek a controlling interest in the refinery, the marine terminal, a pipeline or a tanker fleet.
Black said that in addition to organizing a syndicate of lenders, ICBC could also become an investor, but said negotiations have not advanced to the point of discussing how much ICBC is prepared to lend.
“These are big loans and one bank isn’t going to take all the risk itself. They will spread it around. So what we need is a lead bank to organize that,” he said.
Black told the Canadian Broadcasting Corp. that the MOU is a “non-binding letter of intent. There’s a lot of negotiating to do. But I am very sure we’ll get there.”
Black said he is hoping to use his time in China to develop off-take deals with Chinese energy companies, including PetroChina and Sinopec, to buy fuels from the refinery.
His earlier hopes of using Swiss-based Oppenheimer Investments Group to serve as financing and marketing agent for his privately owned Kitimat Clean suffered a setback three weeks after that initial announcement in March with the sudden death of Oppenheimer co-founder Samuel Grossmann. However, Richard Cooke, Oppenheimer’s senior managing director for the Americas and Africa, said in March that his firm had “the funding committed to do this project,” although it is not clear whether Oppenheimer is still involved.
Refinery at C$15B-C$18B Depending on the design of a refinery to process 550,000 barrels per day of diluted bitumen into transportation fuels, the facility could cost C$15 billion to C$18 billion. Other estimated costs include C$6 billion for a pipeline from the Alberta oil sands, although Black has suggested the crude could be delivered to Kitimat by rail, and C$1 billion for new ocean-going tankers.
No timetable has been set for Kitimat Clean to file applications for environmental and other regulatory approvals.
The proposal is supported by the British Columbia government, which is just as adamantly opposed to Enbridge’s Northern Gateway project to transport 525,000 bpd of crude bitumen to a tanker terminal at Kitimat.
Black has argued that a refinery would create 3,000 permanent jobs, while Northern Gateway’s plan to ship unrefined bitumen to Asia would generate few benefits for the province.
Black said his next moves include opening discussions with First Nations to explore “their concerns and discuss the opportunities” a refinery would present.
Chicago-based Navigant Consulting, in a report commissioned by the British Columbia government, said the refinery could sell fuels in China, India, South Korea and Japan “without major disruption to local spot markets.”
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