December 2, 2009

NORTH WEST UPGRADING

A rendering shows what the upgrader for North West Upgrading will look like after all three phases of construction are complete.

Alberta oilsands

Work set to resume on bitumen upgrader

RICHARD GILBERT

staff writer

A plan to build the world’s first bitumen upgrader that fully incorporates carbon capture technology could make North West Upgrading (NWU) one of the companies to lead the oilsands energy sector out of the recession.

“We were well capitalized at the time of the financial meltdown, which slowed us down a bit,” said Ian MacGregor, chairman of NWU.

“We weren’t able to raise enough money, but we had enough to keep moving.”

NWU was founded in 2004 to build a three-phase, $15-billion upgrader near Fort Saskatchewan in Alberta’s Industrial Heartland.

Like many other oilsands producers, their plans were delayed late last year by falling oil prices, uncertain financial markets and high capital costs.

“We have come a long way in the last year and done a lot of engineering,” said MacGregor.

“We have spent a lot of time dealing with carbon dioxide emissions.”

A unique and more sustainable approach to the upgrading of bitumen is being designed and built by NWU.

“Most upgraders have been cancelled and a lot of people don’t know what to do because of the CO2 (carbon dioxide) regulations,” said MacGregor.

“This was part of our solution from the get go. This is a significant difference because we are the only people in the world with this solution.”

One of the most important elements of NWU’s design is that the upgrader will use gasification to make hydrogen from the heaviest components of the bitumen.

“Most industrial processes involve the addition of hydrogen,” said MacGregor.

“But when you make hydrogen, you also make CO2.”

He said the upgrader will be the first of its kind in the world designed to produce a clean CO2 stream off the gasifier in a useful form.

NWU has a contract to sell the CO2 to Enhance Energy, where MacGregor is also the chairman.

Enhance Energy will take the greenhouse gas from the upgrader by pipeline to an enhanced oil recovery project in the Red Deer area of Central Alberta.

The CO2 will be sequestered or injected into the mature oil reservoir, owned by Fairborne Energy Ltd., to boost production.

“This is the most efficient upgrader in terms CO2 emissions of any plant like this being built,” said MacGregor.

“It will have the lowest CO2 footprint in the world for production based on fuels from heavy feedstock.”

The NWU upgrader also has a refinery that will take bitumen from Alberta’s oilsands region and turn it into low sulphur diesel fuel.

“We take the lowest quality tar like substance and make the highest specification diesel fuel, which is in high demand,” explained MacGregor.

“This European specification diesel fuel can be sold anywhere in the world.”

Another important element in this project could be a proposal by the Alberta government to increase bitumen upgrading capacity and value-added activity within the province, by processing a share of royalty bitumen.

As the resource owner, the government is entitled to take its royalty share of bitumen production in kind.

The government wants to take a portion of these bitumen royalty in-kind volumes and get them commercially upgraded to higher value products.

“The provincial government has recognized that bitumen, if processed, is more valuable than royalties,” he said.

“We have a real compelling proposal to have royalty production.

“If we get this feedstock, we will go back to the markets to raise the money we need.”

The deadline for proposals is Jan 27.

If NWU gets the government contract, it will return to the market to raise additional money for construction.

The company has already raised $400-million for the project from a large group of institutional investors.

MacGregor said the company has signed a number of contracts to secure feedstock from other suppliers.

The upgrader, which is now in the detailed engineering stage, would be built in three phases.

Each phase will cost about $5 billion and would process 77,000 barrels a day of diluted bitumen.

Despite the delay, some preliminary work has already been done.

The site has been cleared, and long lead items, such as the hydrocracking vessel, special delivery material and pumps have been ordered.

No contracts have been awarded yet for construction.

If everything goes according to plan, construction will be well underway this summer and the first phase will be complete in early 2013.

The second and third phases are scheduled for completion in 2015 and 2017 respectively.

At the peak, there will be between 3,000 and 5000 people involved in the construction of the upgrader, which would make it one of the biggest projects in Alberta.

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