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North West Refining defends Sturgeon refinery

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Hydrocarbon Engineering,


North West Refining is responding to comments in the media regarding the profitability of Phase 1 of the Sturgeon refinery. Those who suggest that this project is not profitable must engage the facts and not just make assumptions. The Conference Board of Canada recently completed an independent and detailed study of the economic benefits of this project. It concluded that 'over the life of the project, the Sturgeon refinery will be profitable across a broad range of differentials'. It estimates annual profits to the Alberta Petroleum Marketing Commission, as the agent for the Province of Alberta's bitumen, from selling the diesel and other products produced by the refinery at a minimum of CAN$88 million/y.

In addition to the profits from refining bitumen, there are substantial additional economic benefits realised from the project for Alberta families. Phase 1 construction has supported thousands of engineering jobs for Albertans, over 3000 jobs in the modular and fabrication shops around the Edmonton area, site labour that peaked at 7500 workers daily, and over 40 million hours executed. These are actual jobs for Alberta technical experts and craft labourers (electricians, pipefitters, boilermakers, plumbers, etc.) during a very challenging time in the province's job market.

The Conference Board of Canada stated, "The results of macroeconomic modelling suggest that the positive effects of the construction and operation of the refinery will extend beyond the project's toll-payers and shareholders and past Alberta's borders, by increasing GDP, government revenues, and employment opportunities. For example, for the construction phase alone, total capital expenditure of CAN$8.6 billion, incurred over the 2007 – 17 time frame, are estimated to result in CAN$7.9 billion in total value-added impacts across the Canadian economy, 75 884 person-years of total employment impacts, and CAN$1.9 billion in various forms of federal and provincial government revenues." (Is There Value in Adding Value? An Assessment of the Sturgeon Refinery, December 2016).

At the time that construction was started on this project in late 2013, the official cost estimate to complete construction was approximately CAN$8.5 billion. The project is now 96% complete. Since 2013, some costs have escalated due to a higher than expected USD/CAD exchange rate, minor scope changes, and productivity challenges. Although regrettable, this is not inconsistent with the experience of other large capital projects. But, it is important to note these capital cost increases have also been offset by approximately CAN$1 billion in cost savings resulting from lower financing costs. Because of these savings, the actual toll payable for refining the province's bitumen will be in line with the 2013 estimate.

The Sturgeon refinery is currently in the process of commissioning some of the refinery units and expects to be producing ultra-low sulfur diesel before the end of 2017. Some of the processing units will not be complete until the end of 2017, so the official commercial operations date of the entire refinery will not be completed until commissioning of those units is complete, which is expected in 2Q18.

Read the article online at: https://www.hydrocarbonengineering.com/refining/03072017/north-west-refining-defends-sturgeon-refinery/

 

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