BC's 3 oil refineries: which will go?

B.C. could play an even bigger role than expected in getting Alberta’s oil to market. As Alberta seeks overseas customers for its petroleum products, three refinery and upgrader proposals have emerged as leading contenders to make that happen.

The projects pitch converting oil sands bitumen prior to shipping, relieving the need for tankers full of diluted bitumen (dilbit) navigating the coast – a point of contention for First Nations due to the potential impact on marine habitat.

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One of the major focuses of all three projects is on mitigating environmental impacts and ensuring that First Nation partnership consent is given from the get-go.

Pipelines such as Northern Gateway are proposed as a method of transporting dilbit to international markets for refining. Current Canadian operations are capable of refining light crude oil and upgraders convert heavy oil into a lighter crude, but heavy oil refining is largely done in the U.S.

“From an upstream perspective, every refinery is a new customer and every customer is good and we are all for them,” Canadian Association of Petroleum Producers Manager of B.C. Operations, Geoff Morrison said. “But, it is easier to sell an unrefined product than a refined product; that’s part of the dimension of that. You typically refine closer to markets in which you consume them, as opposed to refining them here and finding a market for that specific product.”

Morrison said refining prior to transportation requires finding a customer for that specific product, be it gasoline, diesel, jet fuel or otherwise.

“That’s not to say it can’t be done and it certainly can be done, were all for refining in Canada, more customers are good and that’s an important discussion that needs to happen,” Morrison added.

With much of the conversation around the proposed projects focusing on their social license, Morrison said it is certainly a marker of how expectations have changed.

“It has changed a lot, the magnitude of projects has changed, the opportunities have changed and the expectation of society in general,” he said. “There is greater expectation of participation and part of the decision making process.”

Morrison noted that this change is not unique to oil and gas, considering other major development projects that have received a great deal of public response, but that it has certainly been visible across the industry.

Before shovels enter the ground on the Northern Gateway pipeline, Enbridge has some work to do on the 209 conditions the National Energy Board stamped on it.

The following is a breakdown of the three proposed refinery projects in British Columbia.

Pacific Future Energy

Pacific Future Energy is a Vancouver-based company headed up by B.C.-native and CEO Robert Delamar and Executive Chairman Samer Salameh, whose funding group provides financial backing for the proposed project.

Salameh manages telecommunication practices for Groupe Salinas, owned by Mexican billionaire Ricardo Salinas, but Pacific Future is an independent company.

Cost and production: The first phase of the refinery project will come at a cost of $10 billion, producing approximately 200,000 barrels per day. The refinery is designed to consist of five modules at a total of 1 million barrels per day. With each subsequent module costing approximately 60 per cent of the initial piece, the projected cost at build out is more than $30 billion.

Location: Pacific Future is considering three options for the refinery site, all located on major water sheds.

“Prince Rupert is the leading candidate right now but we also have visited Kitimat and begun some discussion with local folks,” said Delamar, adding that the third site is further north but would not yet be disclosed.

Product: The refinery will convert bitumen into gasoline, diesel, kerosene and other distillates.

Job potential: Delamar said the forecasted job opportunities were in line with other proposed refinery projects, suggesting between 2,500 and 3,000 full time jobs would be created after completion. For short-term positions, he said between 6,000 and 10,000 construction jobs are predicted to open.

Relationship with First Nations: An early hire for the company was Vice-President, Indigenous Partnerships, Jeffrey Copenace. An Ojibway of Onegaming First Nation in Northwestern Ontario, Copenace was deputy chief of staff to former Assembly of First Nations chief Shawn Atleo.

“From the very beginning, and every step of the way, our partnership with First Nations will ensure that we all benefit from traditional and ecological knowledge, while respecting their rights to full consultation and accommodation,” Copenace said in a release. “All with the goal of shared prosperity and health for future generations.”

The company has pledged a full partnership with First Nations on the project and Delamar said they have approached this by having conversations with stakeholders early on.

“We’ve just begun the conversations. We basically looked at what Enbridge did and we’re trying to do absolutely everything the opposite,” said Delamar. He said Copenace has begun the outreach and discussions with local First Nations and stakeholders and the company is continuing on from there.

“Our simple goal at this point is to begin the conversations, to listen and then take the further steps as local First Nations so desire.”

Environmental policy: Pacific Future has claimed to be the “greenest refinery in the world”.

“Our ultimate business objective is to create something called a near zero net carbon emission refinery. We intend to add as little or close to zero net emission from the refining process to the local air shed as possible, so that’s the stated business object,” said Delamar. “Since a zero net carbon emission refinery has yet to be built in the world, this will be the first to attempt what we’re doing. We will get near or as close to zero as possible and so it’s that getting near to zero that makes it the greenest refinery in the world.”

The components that contribute to this effort include carbon capture and sequestration, which incorporates several methods such as repurposing emissions and gas to liquid technology. The refinery will also be powered by natural gas, rather than coal or diesel.

The design was undertaken by Milan-based engineering and contracting company Simeco which has experience in building refineries under Europe’s stringent regulations.

“They’ve designed a number, so they completed front end engineering design for a couple of other refineries in Europe that incorporated a lot of green technology. In particular, in Italy they designed a refinery for Eni which is the national petro-chemical company in Italy,” said Delamar. “It basically incorporated some of the leading carbon capture and sequestration technology, which we’re also looking at for our design.”

In terms of green refineries, Delamar pointed out that the majority of green technology initiatives have gone towards traditional crude oil, making Pacific Future’s plans another first.

Transportation: There is currently no pipeline involved in the project and Delamar was very clear that they are not in the business of building pipelines.

“The initial refinery design, in the first 200,000 barrel per day capacity, is not dependant on a pipeline. We would anticipate in that initial space and time that rail would be used as an alternate method of transportation if the pipeline issue isn’t sorted out,” said Delamar. “Obviously, pipelines feed refineries so if there is a pipeline we would use it but we designed the refinery – one of the reasons we have the five tranches of capacity – in the manner we have so that we could make this entirely independent of the pipeline project.”

Moving forward: The company has begun pre-feasibility studies analyzing economic, social and environmental impacts of the refinery in order to select a prospective site.

“There’s a project management philosophy called the Gates Theory of Building Refineries, there’s basically four gates that lead to ultimately putting shovels in the ground,” said
Delamar.

The company announced mid-June that they would begin pre-feasibility studies, prior to which they spent the past six months incorporating the company, hiring management, opening an office and beginning pre-pre-feasibility studies which Delamar said ensured that the project made sound economic sense.

“With that pre-pre-feasibility activity was the business case, as well as the refinery design that could, within the state of metric of  $10 billion capital expenditure, allow us to build the greenest refinery in the world,” said Delamar. “So the question was can you do it with this budget, in this geography? And the answer came back yes.”

 

Eagle Spirit Energy

Eagle Spirit Energy is an Aboriginal-owned and operated company headed up by Chairman and President Calvin Helin. The company is financially backed by The Aquilini Investment Group, owners of the Vancouver Canucks and Rogers Arena.

Eagle Spirit Energy was formed specifically for this project and Helin said, “This all began about two years ago but our first intention was to first of all go out and listen to the communities and to see what they would accept, if anything, for an oil pipeline coming through the province and looking at it, in light of the fact that oil is so important to the GDP in Canada, at some point this is going to be inevitable.”

Cost and production: A cost of $15 to $20 billion is estimated for pipeline construction and approximately $30 billion for the upgrader that will process 1 million barrels per day.

Location: With a refinery in either Northern Alberta or Northeastern B.C. Eagle Spirit has signed non-disclosure agreements with three coastal communities that are potential port locations. Helin emphasized that Kitimat is not one of the three ports.

Product: synthetic crude oil.

Job potential: during construction, Helin forecasted approximately 7,000 to 10,000 jobs between the pipeline and upgrader projects. After build out, he estimated 10,000 long-term jobs for community members.

Relationship with First Nations: The project is Aboriginal-owned and controlled and boasts the key objective “to assist aboriginal communities and individuals to become successful with managing economic opportunities in their traditional territories,” said Helin.

Helin is a member of the Lax Kw’alaams First Nation, an award-winning author, entrepreneur and advocate of indigenous self-reliance. He has said that the project, and it’s location near Prince Rupert, comes out of concern for a lack of transparency and respect for the environment and affected communities that have plagued recent energy projects such as Northern Gateway.

Notable Aboriginal businessman Dave Tuccaro of the Mikisew Cree Band is among the board members for the company.

Tuccaro is President and CEO of the Tuccaro Inc., an investor in the oil and gas industry and is the founding president of the National Aboriginal Business
Association.

“Major corporations do not understand that the era of business-as-usual approach to offering beads and trinkets to First Nations for projects in their traditional territory is over,” Tuccaro said in release. “Aboriginal people are not anti-business and they recognize the opportunities that development brings, but projects need to be done on their terms.”

Eagle Spirit has received preliminary support from various First Nations in B.C. and is seeking the same support in Alberta.

Environmental policy: Eagle Spirit seeks to lessen the threat to the coastline in the case of a dilbit spill by refining bitumen prior to export.

“What we learned from our meetings with First Nations, from the border out to the coast, is they don’t want bitumen flowing through the province, at least through major water ways and sensitive ecosystems,” said Helin. “That’s why we wouldn’t put it out on the coast, anywhere.”

By building an upgrader in either Alberta or northeastern B.C., the pipeline would transport synthetic crude, an amber coloured, lighter form of crude oil, rather than bitumen. “What we’re looking at is a new type of proven technology that reduces CO2 by 50 to 80 per cent in the production of synthetic crude oil and it turns the really toxic and undesirable stuff – the dirty part of bitumen, or dirty oil – instead of turning it into petcoke and having piles of the stuff which you don’t know what to do with, what we will do is through this process which is a gasification process that uses LNG, turn that stuff into valuable diesel, the highest quality synthetic diesel and jet fuel oil,” said Helin.

Transportation: Helin has vocalized opposition to the Northern Gateway Pipeline and billed the proposed Eagle Spirit pipeline as an alternative to Enbridge’s controversial project.

Moving forward: Helin has said an application will only be filed to the National Energy Board after the concerns of First Nations have been addressed.

“We’re just moving through what I think should be the final phase in the next couple of months of meeting with First Nations communities and getting them to sign on a preliminary basis with us and that’s how were moving forward,” said Helin. “It’s only going to be with the support of First Nations communities.”

 

Kitimat Clean

The Kitimat Clean project formed in 2012 and is wholly owned by David Black, majority owner of Black Press. The proposed multifaceted project includes a heavy oil refinery, an oil and natural gas pipeline and a tanker fleet.

Cost and production: $21 billion for a refinery with a production capacity of 550,000 barrels per day. Combined costs for an oil and gas pipeline, and tanker fleet would be an additional $11 billion.

KC has said the initial $32 billion in capital costs would be borrowed and repaid within the first 10 years of production.

Location: A 1,150 kilometre pipeline running from Edmonton will connect to the refinery near Kitimat, on the Douglas Channel.

Product: The pipeline will carry dilbit from Edmonton to the Kitimat refinery.

Job opportunities: The refinery alone is suggested to create approximately 3,000 jobs, as well as an additional 3,000 permanent jobs for petro-chemical businesses in close proximity.

Relationship with First Nations: KC has held consultations with various First Nations without announcing any formal agreements.

Environmental policy: The project proposes to use new Canadian technology, the Fischer Tropsch process, to cut greenhouse gas emissions in half when compared to other heavy oil refineries. This will be the first time the process will be used for heavy oil refinery – the method for which was patented in 2013 by Calgary-based Expander Energy.

Through this process, all steam and electrical power needed to run the refinery and half of the required water will be produced internally.

Transportation: A dilbit and natural gas pipeline will offer transportation through western Alberta to British Columbia’s north coast.

Moving forward: A refinery site has been selected and the B.C. government has reserved Crown Land for the project. KC began a two-year Environmental Assessment in May of this year and has asked the federal government to guarantee $10 billion of the borrowed capital costs.

A financing strategy has been developed and enacted through a signed memorandum of understanding with the Industrial and Commercial Bank of China, as well a forthcoming second agreement with the China Development Bank.

Chinese oil companies have also shown an interest in procuring all of KC’s refined fuel.

A representative for Kitimat Clean could not be reached for comment.

@ Copyright 2018 Pipeline News North

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