February 28, 2011

Major Alberta oil and gas projects move forward

RICHARD GILBERT

staff writer

The construction of a $5 billion upgrading and refining facility near Redwater, Alberta, has taken a step forward as a result of a unique partnership between Northwest Upgrading, Canadian Natural Resources Limited and the provincial government.

“This is a great opportunity for Canadian Natural to be part of a project that not only supports the Alberta Government’s efforts to create value by keeping refining in Alberta, but also supports our marketing strategy to ensure conversion capacity for our products and create shareholder value,” said Canadian Natural Resources Ltd. president Steve Laut.

“Working together with the North West management team, who have extensive experience in building and operating such facilities, will help ensure the success of the project...”

The Alberta government recently negotiated contracts for the project with a partnership between North West Upgrading (NWU) and Canadian Natural Resources Limited (CNRL), as well as a separate deal with Enhance Energy.

The first contract with the NWU and CNRL partnership will lead to construction of a new bitumen refinery in Alberta’s Industrial Heartland, northeast of Edmonton, as part of the government’s bitumen royalty-in-kind (BRIK) initiative.

Enhance plans to build a 240-km pipeline to gather CO2 from several sources near Edmonton and transport it to existing mature oil fields in South-Central Alberta.

The capture and permanent storage of CO2 in these oilfields will increase production, while significantly reducing emissions of greenhouse gases.

According to Stephen Kushner, president of Merit Contractors Association, these projects signify a new direction for Alberta, as a global energy leader.

“We wanted to see more refining capacity in Alberta,” said Kushner. “When you build a refinery and other major projects in Alberta, there is ongoing work for operators and maintenance workers, in addition to the thousands of jobs that get created to build the projects in the first place.”

If the upgrader project is approved, Phase 1 will process 50,000 bbl/d of bitumen to finished products and will incorporate the integrated CO2 management solution.

Phase 1 of the bitumen refinery is targeted for completion in mid 2014. The refinery will process 37,500 barrels daily of Crown bitumen, in addition to 12,500 barrels per day of bitumen from CNRL.

The Crown’s bitumen will be processed for a fee, which will result in the Crown receiving higher revenues created by the higher-priced refined bitumen products.

The two projects will create about 10,000 jobs during construction, plus associated spinoff employment.

The refinery can be expanded in two additional identical phases of 50,000 bbl/d of bitumen at a future date.

Preliminary work at the refinery construction site was halted in 2008, after the collapse of oil prices and global financial crisis.

The deal is an important piece of the project, which will allow NWU to arrange financing, complete detailed engineering and put out its bid packages, with major work not expected to be begin until 2012.

Merit Contractors Association is a member of the Refine it Where We Mine it campaign, which was formed in 2010 to support the initiative of refining more oilsands bitumen in Alberta.

The Alberta government has also committed $2 billion to reduce greenhouse gas emissions through carbon capture and storage.

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