By Stephen Dafoe
Fort Saskatchewan – The Alberta Government officially announced two projects that it believes will advance the upgrading and refining of bitumen in the province while increasing supplies of diesel fuel and enhancing Alberta’s position as a secure supplier of energy.
Contracts were signed Tuesday with the North West Upgrading (NWU) / Canadian Natural Resources Limited (CNRL) Partnership and Enhance Energy Inc.
The North West contract will allow construction of the first phase of a $5.1 billion bitumen refinery northeast of Edmonton in Alberta’s Industrial Heartland through the government’s bitumen-royalty-in-kind (BRIK) initiative. The Enhance Energy Inc. contract advances the province’s first major carbon capture and storage (CCS) project, which will deliver carbon dioxide (CO2) from the refinery and nearby Agrium fertilizer plant in Redwater to conventional oil fields where it will be used for enhanced oil recovery.
Premier Ed Stelmach made the announcement Wednesday morning in Fort Saskatchewan and said the agreement with the two companies is Alberta’s next bold step in a long line of bold steps, one that will ensure Albertans get more from the production of the province’s non-renewable resources.
“I’ve always said that shipping raw bitumen out of the province is comparable to selling the top soil on a farm,” Stelmach said. “I know by doing that you can make a big buck, but at the end of the day it doesn’t get you very far.”
The premier said upgrading raw resources within Alberta creates future prosperity.
“We’re creating a value-added opportunity that grows the economy in Alberta, creates new business opportunities like value-added processing, capturing all the synthetic gases off the upgrader, generating very good jobs for Albertans here in our province – and generating those jobs years to come – and of course revenues, revenues for Albertans through taxes and spinoff economic activities,” the premier said.
It is anticipated the Northwest / CNRL project will create 8,000 construction jobs through the three proposed phases of the development. When completed, each of the phases will be capable of processing 50,000 barrels per day of bitumen feed stock. Additionally, 600 engineering jobs will be created immediately to complete the detailed engineering plans needed for the project to begin construction in late 2011 or early 2012. The first phase is anticipated being operational in mid-2014.
Ian MacGregor, co-founder and chairman of North West Upgraders said he anticipates the construction jobs will last for the next decade as the project builds through the three phases.
The BRIK agreement with the province allows Northwest / CNRL to bring to reality a project North West began seven years ago.
“We started with the idea that eventually the world would figure out that a third of the world’s oil is up in northeastern Alberta,” MacGregor said, adding the increase in production would lead to prosperity. “We’ve never seen a bitumen pump at a service station so we figured somebody had to make it into fuels, and we figured that would be us.”
The refinery’s principle product will be ultra-low-sulphur diesel, something MacGregor said there is a great need for. “Like all economies, Alberta needs it badly, and we could export any surplus to the US, but the most important thing that we see is we can export it to India and China whose markets are growing at five times the rate of the US. If we want the oilsands to grow, we have to get to those markets.”
However, the refinery will also capture approximately 1.2 million tonnes of CO2 per year, per phase, something that will now be used as an additional revenue stream for North West / CNRL and, less directly, the province.
“The old oil fields in Alberta have lots of oil stuck in them, almost half of the original amount in many of them after 50 years of production,” MacGregor said. “If you put CO2 in these oil fields, the stuck oil comes out. There’s 1.2 to 1.4 billion barrels of stuck oil in our province that can be extracted.”
MacGregor said the province stands to receive $25 billion in royalties from stuck oil by investing $400 million in the Enhance Energy Inc. carbon trunk line, the other project the province finalized agreements on this week.
Sturgeon County applauds BRIK
North West / CNRL are not alone in their praise for the province’s BRIK program. Sturgeon County Mayor Don Rigney said the finalization of the contract is important to Sturgeon County, the Capital Region and beyond.
“This is really exciting,” Rigney said after the premier’s announcement Wednesday morning. “It’s been a lot of years coming, but we’ve always said it’s great our children and grandchildren can live, work and play in Alberta.”
Rigney said he believed the agreement was motivated by a desire to see Albertans succeed. “I take my hat off to the premier,” he said. “I think his guiding spirit is he wants everybody in Alberta to have the same advantages that he and his family did, and he’s making sure that happens today.”
The mayor said he was pleased to see the North West project going ahead in Sturgeon County after stalling in 2008 when the economic downturn occurred. “You saw some pretty dark days with the financial markets and the oil markets and the spreads,” Rigney said. “It looked like some really dark days. But given the quality of the people we were dealing with, I never doubted it. These people are exceptional. They demonstrated that from the outset.”
Rigney said although the North West / CNRL project has the potential to double the County’s tax base, he believed the greater benefit to the County and the province is the creation of jobs, pensions and benefits.