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Local proposal selected for royalty-in-kind project
' D/ Z5 g- J( F9 `" ]This is the most significant good news in three years, and maybe we have finally turned the corner in this region … . Neil Shelly, executive director of the heartland association( Z5 G& _5 u! i! L0 Q: |9 B( a! \
The champagne was put on ice in Alberta’s Industrial Heartland Tuesday after the province selected North West Upgrading for negotiations toward a deal to handle 75,000 barrels per day of bitumen. ! L" ?9 a7 k4 P0 d
The corks will pop later this year — if and when a formal contract is signed, which would mean a spring 2011 start on construction of the upgrader project that was halted in 2007. 7 a9 L+ \; e0 X$ s( u
About 3,000 workers will be needed in each of the three planned phases. / e1 x! \: x9 N8 U2 ^% o4 m
“This is the most significant good news in three years, and maybe we have finally turned the corner in this region after the Fort Hills, BA Energy and Statoil projects pulled out. I think companies feel it is time to start investing again,” said Neil Shelly, executive director of the Heartland Association, a collection of local municipalities that includes Edmonton. * G, O ]5 ^" M" N- Q
The upgrader would get its supply through the new Bitumen Royalty in Kind (BRIK) initiative, under which Alberta will begin to take its share of royalties in bitumen rather than cash in a move to encourage value-added production in the province. . [$ R" I9 y4 |6 x9 y( m" @! w
Alberta Energy Minister Ron Liepert said the commercial conditions for processing the government’s bitumen have yet to be worked out, and the project must make business sense.
; D& E9 r% f+ D: V2 i4 g“The whole intent is to get as much value-added as we can. But as a provincial government we have to look at this as a business opportunity, not a make-work project,” he said in an interview. ; |& n4 q# l9 @2 @ B0 U: N( \
“North West is not going to invest $5 billion in an upgrader if they aren’t going to make money on it, too.”
) w/ v* ?% Y% ^2 EBRIK applicants were asked to choose whether they wanted to purchase the bitumen at market value, or charge a processing fee. # R Q8 b' z; s2 _ F \$ U
“It sounds like North West will process the government bitumen for a fee. That gives some assurances to the company, and the province has never done this before with bitumen so I think they want to get it right,” Shelly said. , L6 i1 b4 C0 p/ B3 x
Nor t h West chairman Ian MacGregor said the 75,000 bpd under BRIK and the 25,000 bpd coming from partner Canadian Natural Resources will be enough for the first two phases of the three-phase jointventure project.
7 b* N% W. T6 M2 n5 N“We’ll have two good customers: the province and CNRL. And we’ll help them market the diesel fuel.”
. @ E; X; P" F" d# t P& RMacGregor said North West has six to 10 months more of engineering work to do on the upgrader, “but if you can do this up front you really have a chance to get labour productivity up.” : a$ ?4 V) H; X
“We are going to figure out what we are building and then build it.” ! A! }2 v' `( Z6 d! E8 q/ Q* z5 i5 I
He said in the past, companies got into trouble by rushing projects, but that won’t happen in this case. 3 F* Q+ F& A2 K9 ~) f+ t9 r$ r
Several other firms, including Imperial, were also bidding for the bitumen, but Liepert said the North West proposal was “a very complete one” that includes a carbon-capture-and-storage component.
4 p% h3 ]7 h/ MUsing a gasifier instead of a coker, the plant will produce a pure stream of 3,500 tonnes a day of carbon dioxide that will feed into the Enhance Energy’s pipeline that will move the CO2 to central Alberta for enhanced oil recovery. . ]# O/ E. Q& m; {
Shelly is also excited about provincial comments that up to 400,000 bpd of provincial royalty bitumen could be available by 2020. 3 m0 t' H% h: Y1 A5 y# d& E
“BRIK was always intended as a way for the government to meet their value-added objectives (of upgrading about 65 per cent of bitumen within the province). So this announcement is really a step down that road,” he said.
8 ~1 m) M) D5 ]* ?“We have become concerned about the amount of bitumen that will be leaving Alberta (through two new export pipelines). But if the province sticks to their guns on BRIK, perhaps they’ll be able to turn the boat around and achieve their targets after all.” |
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