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Kitimat refinery seeks federal backing Media mogul believes Chinese financier will cover some 2/3 of C$26B price tag; Canadian governments have backed away from guarantees Gary Park For Petroleum News
British Columbia newspaper tycoon David Black has done well for himself financially through a stable of 120 community and daily publications in Canada and the United States.
It’s beginning to look like adding a multibillion-dollar petroleum industry investment to his nest-egg might have to wait.
His plan for a C$26 billion oil sands bitumen refinery at Kitimat, on the northern British Columbia coast, now hangs on squeezing a loan guarantee of about C$8 billion from the Canadian government — an area that both the federal and provincial governments have shown a strong reluctance to enter.
Black told reporters at a Calgary energy conference in mid-October he will make his first pitch to the government in the spring.
At this point, he has no thoughts of asking the British Columbia and Alberta governments to join such an agreement.
He said the Kitimat Clean project’s major financial backer, the Industrial and Commercial Bank of China, is capping its stake at C$16 billion and now wants Canada to put “skin in the game.”
“I must say I understand that,” he said. “All the banks I’ve ever borrowed from wanted that.”
Industry not likely to fill gap There is little or no chance of the oil sands industry filling that gap. Producers prefer to rely on existing refineries to upgrade raw bitumen into synthetic crude for refining into fuels and would sooner sell the raw bitumen to overseas customers.
Black believes he has “the money in place” to complete a feasibility study that is expected to cost C$125 million to C$150 million.
But he concedes the producers have taken a lukewarm view of his plan and none has agreed to participate, despite his confidence that a Kitimat refinery could be highly profitable.
Adding to the doubts that have accompanied his idea from the outset is the fact that Black is lagging far behind his own timetable for approvals.
In early February he set a tentative target of early April to determine whether the refinery would move forward or quietly fade out.
Noting that the government has provided financial backstops for resource projects in the past and views the export of Canada’s natural resources as a matter of “vital economic importance,” Black said: “Why wouldn’t they do it for this?”
He said the government made a C$1 billion guarantee last year for a C$7.7 billion hydroelectric project in Labrador.
Backing away from guarantees But, despite providing loan guarantees and taking out equity stakes in several energy-related ventures over the 1970-2000 period, the Canadian and provincial governments have long since abandoned those roles, after either paying a heavy price for their gambles, or selling their interests.
Black doubts that Enbridge’s C$6 billion Northern Gateway pipeline, to export 525,000 barrels per day of crude bitumen to Asia and California, will overcome a wall of resistance and gain final approval from the Canadian government of Prime Minister Stephen Harper, which wants to protect the 21 British Columbia legislators it has in Parliament.
He also believes his 550,000 bpd refinery on the coast would help the British Columbia and Alberta premiers, Christy Clark and Alison Redford, overcome one of their concerns about the risk of operating bitumen-landed tankers in British Columbia waters.
Black suggested a British Columbia refinery could help British Columbia achieve its goal of reaping “fiscal and economic benefits” in return for allowing bitumen to move across the province.
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