Wednesday, October 23, 2019

Alberta government analyzing formal pitch for expanding Sturgeon Refinery

Sturgeon Refinery expansion

The Alberta government is now examining a proposal it received last month for the next expansion phase of the over-budget and behind-schedule Sturgeon Refinery project.

Given the problems that have dogged the development — like the fact it’s 65 per cent over the initial budget — it will be a hard sell for the Notley government to put more taxpayer money at risk.

“I don’t think we have enough information on Phase 1 and exactly what the costing will be … and what their plan is before we would ever consider or look at Phase 2,” said Cheryl Oates, spokesperson for Premier Rachel Notley.

A technical analysis on the confidential proposal from proponent North West Refining is underway inside government. Any decision on Phase 2 involvement would have to be made by cabinet.

But make no mistake, the drums will be beating for the Alberta government to get involved.

As the first refinery built in the country since 1984, the Sturgeon facility near Edmonton will soon have the capacity to process 79,000 barrels per day of diluted bitumen into higher-value diesel.

Seventy-five per cent of the bitumen supply will come from the provincial government, with the remainder from Canadian Natural Resources Ltd.

Calgary-based North West Refining owns 50 per cent of the project, while Canadian Natural Resources owns the rest of the North West Redwater Partnership, which is building the project.

While the development is now 96 per cent complete, it also has regulatory approval for two other phases that would boost its capacity to about 240,000 barrels per day.

The megaproject has a long backstory that crosses the complicated divide between politics, economics and the quest for more value-added jobs in Alberta.

Under the Bitumen Royalty In-Kind (BRIK) program developed by the former PC government, Alberta will supply the refinery with 37,500 barrels of raw bitumen per day, which it collects from producers in lieu of receiving royalty payments.

In the Energy Department’s latest annual report, it pegs total costs for the refinery at $9.4 billion, up sharply from the initial $5.7-billion projection made five years ago, and the $8.5-billion estimate released in 2013.

Unquestionably, the project has already created thousands of construction jobs, with the workforce peaking at 7,500 on site.

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