September 20, 2013 7:32 pm
Oil and gas milestone celebrated by Alberta government and industry
By Patricia Kozicka
EDMONTON – Construction on North America’s first new refinery in nearly 30 years is officially underway in Alberta’s Industrial Heartland.
The $6 billion dollar refinery – which will be built near Redwater – will turn bitumen from the oil sands into diesel fuel. Once it’s complete, the new North West project will refine 150,000 barrels of bitumen a day.
“It’s just such an enormous opportunity that it just, I think it dwarfs the CPR, really,” said Ian MacGregor, the chairman of North West Upgrading.
The province’s Bitumen-Royalty-In-Kind (BRIK) program, started by former premier Ed Stelmach, has proven especially critical to the project. The deal works like this: the province accepts bitumen in lieu of some royalty payments from oil sands producers. Some of that bitumen has been committed to the new refinery. The province will pay for its processing and then sell the higher value diesel that’s produced. The deal allows North West to get the funding necessary to build the refinery.
Andrew Leach, from the University of Alberta’s School of Business, calls it a “consequential moment for Alberta.” While he won’t call it a bad deal, he believes the risk isn’t necessary as minimal as the province and company suggest.
“They’re making a bet on a spread. Yes, if bitumen is heavily discounted relative to diesel fuel, they’re going to come out ahead,” Leach explained. “If this was an obvious bet that you could make a rate of return on this investment, you’d see companies doing it too.”
“It’s fundamentally a government investment in a refinery, and I don’t think people are really clear on it,” he added.
Leach believes the province should be “a little more forthcoming about what risks they’re taking.”
The county’s mayor, meanwhile, believes the rewards will far outweigh the risks; the refinery could double the county’s taxbase.
“This will ensure jobs, pensions and benefits and our kids and grandkids can live, work and play in Sturgeon County,” said Sturgeon County Mayor, Don Rigney.
Alberta’s energy minister also believes the risk is a manageable one.
“Life is full of risks. If you stand still, there are risks. Standing still actually has more risks than actually building our future,” said Minister Ken Hughes. “We’re prepared to use our very substantial resources to build this province – to create opportunity.”
The project has reportedly already employed more than 1,000 people – a number that’s expected to increase to 8,000 at the peak of construction.
With files from Fletcher Kent, Global News
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