...........

[Deer Hunter]

Eating our lunch...

https://www.bnnbloomberg.ca/alberta-...ject-1.1215262

Alberta Pushes Refineries in Shadow of Old Money-Eating Project


Robert Tuttle, Bloomberg News

(Bloomberg) -- While Alberta Premier Rachel Notley touts new refineries to ease the Canadian province’s oil woes, one government-backed plant has been eating up taxpayers’ money without giving anything in return.

The North West Redwater Partnership’s Sturgeon refinery some 350 kilometers (215 miles) north of Calgary -- partly designed to process as much as 37,500 barrels a day of oil-sands bitumen that Alberta collects from producers as royalty payments -- is months late in honoring its part of the deal.

Yet, since June, the province has been paying the unit an estimated C$750,000 ($560,000) a day in fees anyway, according to estimates by Brian Livingston, executive fellow at the University of Calgary’s School of Public Policy.

That’s because an agreement originally drafted in 2011, before Notley’s time, required a provincially owned corporation to start paying fees to the refinery in June 2018, regardless of whether the unit was actually processing anything. To make matters worse, the fee has increased because it’s linked to the project’s rising operating and borrowing costs.

The imbroglio highlights the kinds of unexpected pitfalls Alberta might be setting itself up for with a slew of moves to rescue its beleaguered oil industry. The province is buying tank cars to ship crude by rail to the U.S. Gulf Coast, offering funding for prospective refinery and crude-upgrader projects and is limiting the amount of oil companies can produce, a bit like an OPEC country.


“My guess is that they have probably learned a bit from this in terms of how they position themselves for future deals,” said Jason Parent, vice president of consulting at Kent Group Ltd. a downstream consultancy based in London, Ontario.

The Sturgeon refinery hasn’t started processing Alberta’s heavy crude yet because it experienced equipment failure in a unit, which is the “main cause of the delay,” the company said in a Feb. 7 statement. It will update its timeline on the start of bitumen processing early this year “after additional progress on repairs and tests are completed.”

Alberta is “carefully” advancing a strategy to do more refining and upgrading locally and “we share the spirit” of North West Redwater’s goals, Michael McKinnon, a government spokesman, said in an email. The province “still expects to see a net benefit to Albertans over the long term.”

The amount the government has paid in fees to the refinery hasn’t been disclosed but is anticipated to be included in a report this year, McKinnon said.

To be sure, there’s a very compelling reason for Alberta to seek creative ways to encourage local refining: It produces more crude than it can ship and that sent local prices plummeting last year.

North West Redwater is a venture between Canadian Natural Resources Ltd. and closely held North West Refining Inc. The government’s support for the Sturgeon refinery and an accompanying carbon capture and storage project was controversial early on. The project’s cost has more than doubled to C$9.7 billion as of last year. The government’s support for the venture included C$432 million in loans.

Julie Woo, a spokeswoman for Canadian Natural, declined to comment. North West Redwater didn’t return an email seeking further comment.

The first phase of the refinery was supposed to receive 75 percent of its feedstock from the province in the form of bitumen, which the plant would process into diesel and other fuels for a fee, and then sell on behalf of the province. The other 25 percent of the refining capacity is reserved for Canadian Natural. All told, when including the diluent that is mixed with bitumen, has a processing capacity of about 80,000 barrels a day.

The refinery started operating more than a year ago, processing some light synthetic crude but none of the province’s bitumen at the moment.

Meanwhile, North West is raking in the fees.

[ESOXangler]

It's revenue neutral at the moment. And the failure was 100% no ones fault. Once fixed itll make alot of money for the province.

I notice you complain alot about that plant. Fail a pee test or duff the interview?

[Deer Hunter]

It's revenue neutral?
It's a boondoggle.

[Scott h]

Originally Posted by Deer Hunter

It's revenue neutral?
It's a boondoggle.

So the government putting taxpayers money into oil and gas is a waste ?

[Deer Hunter]

Originally Posted by Scott h

So the government putting taxpayers money into oil and gas is a waste ?

In this case yes. A huge waste that taxpayers will pay for for decades.

https://www.cbc.ca/news/canada/calga...nery-1.3037519

[dmac]

Originally Posted by Scott h

So the government putting taxpayers money into oil and gas is a waste ?

No but bad deals are a waste.

[Big Grey Wolf]

Lets do the math, we were getting $12/bbl for our bitumen a couple weeks ago. Then with the Refinery producing diesel we will now have "value added" product that retails for between $150 to $190/bbl. Oh what terrible economics!

[ditch donkey]

Originally Posted by Big Grey Wolf

Lets do the math, we were getting $12/bbl for our bitumen a couple weeks ago. Then with the Refinery producing diesel we will now have "value added" product that retails for between $150 to $190/bbl. Oh what terrible economics!

I’m not saying you’re wrong. But oil companies are in the business of making money, and typically pretty good at it. If another refinery in Alberta was viable and profitable why wouldn’t a oil company make the investment on their own? Why do we need a government to become a stakeholder?

We had a large company more than happy to run a pipeline, but government got involved and now look where we are?

I’m not sure a government spending other people’s money is the answer.

[Scott h]

Originally Posted by Big Grey Wolf

Lets do the math, we were getting $12/bbl for our bitumen a couple weeks ago. Then with the Refinery producing diesel we will now have "value added" product that retails for between $150 to $190/bbl. Oh what terrible economics!

Seems like a fairly large increase in $$$$$ and diesel takes just as much space in a pipeline........

[Scott h]

Originally Posted by ditch donkey

I’m not saying you’re wrong. But oil companies are in the business of making money, and typically pretty good at it. If another refinery in Alberta was viable and profitable why wouldn’t a oil company make the investment on their own? Why do we need a government to become a stakeholder?

We had a large company more than happy to run a pipeline, but government got involved and now look where we are?

I’m not sure a government spending other people’s money is the answer.

Then Albertans should be glad to get the $12-14 per barrell they were getting.....

[Scott h]

Originally Posted by dmac

No but bad deals are a waste.

I would bet that they will be able to sell every barrel that comes out of that plant for top dollar.

[Scott h]

Originally Posted by Deer Hunter

In this case yes. A huge waste that taxpayers will pay for for decades.

https://www.cbc.ca/news/canada/calga...nery-1.3037519

Wasn't it a huge waste selling oil for $12 a barrel???

[bessiedog]

Originally Posted by ditch donkey

I’m not saying you’re wrong. But oil companies are in the business of making money, and typically pretty good at it. If another refinery in Alberta was viable and profitable why wouldn’t a oil company make the investment on their own? Why do we need a government to become a stakeholder?

We had a large company more than happy to run a pipeline, but government got involved and now look where we are?

I’m not sure a government spending other people’s money is the answer.

You get that the entire oil sands development would never have happened without the provincial and federal governments giving the buckets of $$...?

1993.... Cretienne govt gives oil sand co’s 23billion dollar tax break over 25 years..... dats a whack o cash!

And how’s that turned out for us...?


Ever wonder how Calgary or Vancouver got thriving film industries?

Ever wonder how Canada got its own aeronautics and airline industry?

Keynesian economics.

[Deer Hunter]

Originally Posted by Scott h

Wasn't it a huge waste selling oil for $12 a barrel???

And it's had nothing to do with this refinery. And the terrible deal the province got into here.

[Scott h]

Originally Posted by Deer Hunter

And it's had nothing to do with this refinery. And the terrible deal the province got into here.

Well considering the chances of getting much more export capacity in the future is slim to none, I would guess that best thing to do is take that same volume and increase it's value. Exactly what that new refinery is designed to do.

[ChickakooKookoo]

Isn't this just par for the course for major industrial projects in Alberta? Wasnt Kearl two years behind when it finally fired up?

[Jays toyz]

The title is misleading. There are no sturgeon being refined at all with this facility. Though it makes more sense now that I have read it.

[ditch donkey]

Originally Posted by bessiedog

You get that the entire oil sands development would never have happened without the provincial and federal governments giving the buckets of $$...?

1993.... Cretienne govt gives oil sand co’s 23billion dollar tax break over 25 years..... dats a whack o cash!

And how’s that turned out for us...?


Ever wonder how Calgary or Vancouver got thriving film industries?

Ever wonder how Canada got its own aeronautics and airline industry?

Keynesian economics.

Yeah, I get that. Those are great things.

These governments seem to want to play an active role, instead of getting out of the way, and making it easier for corporations to do what they are good at, making money.

[bessiedog]

But you don’t get it.

It’s the same thing should probably happen here too. It’s just taking longer.

But...... I believe that corporations now actively try to exploit the ‘government t revenue’ line of their balance sheets to maximize profits.

It seems to be a type of ‘moral hazard’ .

So who is the bad guy here?

Govt trusting the timeline of a corporation?

Or the corporation..?


You tell me.

[AndrewM]

Originally Posted by Big Grey Wolf

Lets do the math, we were getting $12/bbl for our bitumen a couple weeks ago. Then with the Refinery producing diesel we will now have "value added" product that retails for between $150 to $190/bbl. Oh what terrible economics!

Don't forget to deduct op costs, transportation costs and you still need a pipeline to sell that product. Its easy to make an allusion to simple economics. Much harder for the true ones.

[keeks]

350 km north of Calgary. Lol.

[petew]

No surprise it has troubles. It was fabricated in India where they work for a bowl of rice a day , and sent here for assembly .Lots of shody workmanship came out of those sea cans , but we only fixed what was obvious to the eye, or just didn't fit.
God knows the weld quality from India, at least it hasn't burned yet.
For sure the QA/QC paper work from India says all is fine.

[sns2]

All you "let the market do its thing" guys should maybe think that corporations have one concern, their bottom line. If it is more profitable to build or operate a refinery elsewhere then they will damn sure do it. We need jobs in Alberta, and we need value-added jobs in Alberta. Nobody is bitching about the gov't subsidies given to the oilsands that Bessiedog pointed out. We will not now the story until it is fully written. Right now we are only in the introduction.

[AndrewM]

If it’s true about the fabrication being done in India, I doubt that added many jobs in Alberta. Government subsidies are all right as long as the tax payers get a decent return on their capital to offset the interest and they don’t take all the risk. Otherwise it’s just another form of equalization and a waste of our money.

[elkhunter11]

Originally Posted by Big Grey Wolf

Lets do the math, we were getting $12/bbl for our bitumen a couple weeks ago. Then with the Refinery producing diesel we will now have "value added" product that retails for between $150 to $190/bbl. Oh what terrible economics!

Have you ever looked at how much diesel you get from a barrel of bitumen? Have you looked at how much it costs to refine a barrel of bitumen into diesel? It isn't as cheap as many people think, especially with the regulations on how much sulfur diesel can contain. And of course you do need to cease production periodically to perform maintenance, during which you pay even higher maintenance costs. Yes it is profitable to refine diesel, but after you factor in building and maintaining the refinery, and paying and equipping the workers, it isn't as profitable as some people assume.

[Big Grey Wolf]

Elk,you are correct, there will be other products produced in the NW Upgrader like naphtha/diluent shipped back to Ft Mac to blend into dil/bit, so we do not have to bring it from the Gulf coast.

[elkhunter11]

Originally Posted by Big Grey Wolf

Elk,you are correct, there will be other products produced in the NW Upgrader like naphtha/diluent shipped back to Ft Mac to blend into dil/bit, so we do not have to bring it from the Gulf coast.

Actually only about 1/4 of a barrel of bitumen is refined into diesel.

[Okotok]

Originally Posted by Big Grey Wolf

Elk,you are correct, there will be other products produced in the NW Upgrader like naphtha/diluent shipped back to Ft Mac to blend into dil/bit, so we do not have to bring it from the Gulf coast.

The majority of our diluent for dilbit is sourced from South of the border as we have nowhere near enough. All the more reason to partially upgrade or develop new technologies. My company has been working on new technologies with the end result being the capability to ship undiluted bitumen. This would drastically reduce the need to import condensate as well as free up the 30% of pipeline space currently used up by diluent. It also eliminates a diluent return line. A little more complicated than that, but many more pros than cons. Partial upgrading is another solution, albeit much more expensive.

[Reel Time Rut Outdoors]

Actually rules for marine transport diesel are changing, getting more strict with less sulfur content required. These new rules come into effect around 2020 I think. One of the big ideas behind the refinery was to make diesel to this standard in anticipation of this. Obviously other refineries will have to change to meet these standards. Carbon capture also cost a lot to implement. And most of the fabrication happened in China, not India. Not that it makes much of a difference.

[Bush Critter]

I hope that the bugs get ironed out and this plant starts making a ton of money so they can get phase two started...