CNRL joins upgrader project
50/50 partnership 'a real step forward,' North West says
By Dave Cooper, Edmonton JournalJanuary 29, 2010 3:04 AM
A proposed Redwater-area upgrader got a shot in the arm Thursday by attracting a heavy-hitting partner to supply some of the needed bitumen feedstock, and financial and technical support.
North West Upgrading, which has already spent about $300 million -- including $100 million for major equipment sitting in storage -- will be joined by Canadian Natural Resources Ltd. on the $4-billion project that could be operating by 2013.
North West will remain as the project operator, and the 50/50 joint venture is anticipated to close later this year.
North West was one of several bidders for Alberta's bitumen royalty in kind (BRIK) program, which initially will sell 75,000 barrels per day to firms that agree to "add value" or upgrade the raw product. Submissions closed late Wednesday.
North West is applying for 37,500 bpd for its first phase, with an additional 12,500 bpd coming from CNRL. When diluent is added to that raw bitumen, the feedstock will equal 77,000 bpd, and because of its efficiencies, the output will also be 77,000 bpd.
Imperial is also bidding under BRIK, as are several other firms that have not been identified.
"We do no not normally release the names of proponents, but they can themselves if they wish," said Alberta Energy spokesman Bob McManus.
All the proposals will be studied, and a decision is not expected before the end of May, he said.
Ian MacGregor, North West's chairman, said CNRL's vote of confidence is very encouraging.
"This is great for us and a real step forward. And it really helps us because they have recent construction experience (at the Horizon oilsands mine and upgrader project)."
The North West project will be the world's first upgrader with an integrated carbon-dioxide recovery system hooked into Enhance Energy's Alberta Carbon Trunk Line, which intends to supply CO2 for enhanced oil recovery in central Alberta.
"For us, this project makes a lot of sense. But of course, we haven't seen what other projects have been proposed," said Neil Shelly, executive director of Alberta's Industrial Heartland, a four-member municipal group that will welcome Edmonton as its newest member today.
"The North West project is like an upgrader on steroids, a mini-refinery that takes bitumen and converts it to diesel and pumps the CO2 into the Enhance pipeline, so it is a green product," he said. And this is becoming increasingly critical for Alberta oilsands producers, he added.
"California's low-carbon-intensity fuel standards would disadvantage oil from the oilsands. California is not our traditional market, but 11 other states may follow California," Shelly said.
In Canada, B.C., Ontario and Quebec have said they are unhappy with Ottawa's stand on greenhouse gases.
So facilities like North West could be a look at the future, Shelly said.
"In California, they will ramp up over the next decade to E-10, or 10 per cent ethanol, which means fuel must have the equivalent carbon footprint of that mixture."
The diesel fuel to be produced by North West will meet or exceed that standard.
"So for Alberta, carbon capture and storage is becoming more and more about market access for our products."
Alberta's BRIK program collects upwards of 25 per cent of a project's production once capital costs are paid. As prices escalate, so does the royalty, up to 40 per cent at $120 or higher.
The province doesn't collect a percentage of production, but rather bitumen or product from bitumen equal to between 25 and 40 per cent of net profits once capital costs are paid out.
