November 14, 2012

$15 billion upgrader gets green light

RICHARD GILBERT

staff writer

North West Redwater (NWR) Partnership is moving forward with the construction of a $15 billion bitumen upgrader near Fort Saskatchewan, Alberta, which could become the first facility in the world to fully incorporate carbon capture technology.

“This is absolutely spectacular news, which is very exciting for Alberta and Canada,” said James Gibbons, executive director of Building Trades of Alberta, which represents 16 trade unions with more than 75,000 union members in the trades.

“This particular project has been in the works for a long time and the building trades have been part of the discussion with the owners, as well as the planning.”

Last week, NWR announced that the board of directors of its partner companies has approved the construction of Phase 1 of the Sturgeon Refinery, which will have a capacity of 50,000 barrels per day and will cost an estimated $5.7 billion.

NWR is a partnership between North West Upgrading Inc. and Canadian Natural Upgrading Limited, a wholly owned subsidiary of Canadian Natural Resources Limited.

This project represents the first of three phases of 50,000 barrels per day, which will eventually produce 150,000 barrels per day of high value products.

In particular, the upgrader will take bitumen and produce ultra-low sulphur diesel for local and export markets.

This high-specification diesel fuel can be sold anywhere in the world.

The first phase is expected to take about three years to build, with above ground construction starting in spring 2013.

“This is the first refinery in the world that incorporates CO2 capture into the initial design,” said Ian MacGregor, founder and chairman of NWU.

“The facility will capture 1.2 million tonnes of CO2 per year per phase, which will be sold for use in enhanced oil recovery before being sequestered.”

One of the most important elements of upgrader’s design it that it will use gasification to produce its own hydrogen from the heaviest components of the bitumen.

As a result of this process, the upgrader will also produce a clean CO2 stream in a useful form.

This CO2 will be sold to Enhanced Energy, where MacGregor is also the chairman.

Enhanced 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 a mature oil reservoir, owned by Fairborne Energy Ltd., to boost production.

Another important element in this project is a deal with the Alberta government to process 75,000 bpd of bitumen received in lieu of royalties, under the Bitumen royalty-in-kind (BRIK) initiative.

Alberta Petroleum Marketing Commission, an agent of the Province of Alberta, will supply 75 per cent of the feedstock and Canadian Natural will supply the balance.

NWR has 30 year processing agreements for 100 per cent of its Phase 1 feedstock capacity.

The BRIK initiative is part of the province’s plan to use bitumen to revive stalled upgrader projects and keep jobs in Alberta.

Like many other oilsands producers, NWU plans for construction were delayed in late 2008 by falling oil prices, uncertain financial markets and high capital costs.

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

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

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

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