| Petroleum
News: Upgraders on the up and up for Alberta:
Week of January 01, 2006
Canada-China venture joins
three other plans to process oil sands’ bitumen
in Edmonton area, ignoring Imperial’s message
Gary Park
Petroleum
News Canadian Contributing Writer
What made Imperial Oil uneasy has not
deterred others as they roll out plans for
upgraders to support rapid growth in Alberta’s
oil sands production.
Start-up producer Synenco Energy, in
partnership with China’s Sinopec, said it has
chosen a location for a two-stage, 100,000
barrel per day plant near Edmonton linked to its
Northern Lights mining and extraction operation
in northeastern Alberta.
In gearing up to file a regulatory
application for the facility, Synenco joins
North West Upgrading, Heartland and Shell
Canada’s Scotford refinery — all of them in the
Edmonton region — in pressing ahead with
upgraders, which turn raw bitumen into synthetic
crude.
The Synenco announcement came two weeks
after Imperial Chief Executive Officer Tim Hearn
announced his company would not proceed with an
upgrader at the site of its possible 300,000 bpd
Kearl project because of a concern that the
line-up of projects was growing too long.
He said a combination of surplus oil
capacity as more non-OPEC production comes on
stream and an economic slowdown could cause a
“lot of pain” for upgrader owners.
Upgraders profit from value added
The upgraders derive their profit from buying
feedstock at low prices, converting the raw
material into a value-added product and selling
high, with bitumen generally priced at 40
percent below the synthetic crude that comes
from the plants.
But their success is based on those market
“differentials” holding firm.
Synenco said it plans to build a 50,000
bpd plant at a cost of C$1.7 billion to come on
stream in 2010, followed by a second phase in
2012.
With Sinopec as a 40 percent partner in
Northern Lights and now that it is trading
publicly, Synenco is hoping to file its mining
and extraction application by mid-2006.
It is already spending C$250 million on
advance work and is placing deposits for long
lead-time equipment orders.
Northern Lights estimated at 1.49 billion
barrels
The Northern Lights lease covers almost 50
square miles and independent estimates put the
in-place bitumen deposit at 1.49 billion
barrels, with high and low estimates ranging
from 2.38 billion to 836 million.
To make the project “virtually energy
self-sufficient,” the partnership is developing
plans for a gasification unit to turn
bottom-of-the-barrel bitumen into synthetic gas,
eliminating the need for natural gas to fuel
mining, extraction and processing.
Synenco has updated its budget projections
to C$5.3 billion, but has warned that could
reach C$6.9 billion.
Synenco President Todd Newton is not
troubled by the number of upgraders in the
works.
North West is moving ahead with a C$1.6
billion plant to produce premium grades of
refinery-ready oil; Heartland has started
construction on its C$1.8 billion facility; and
Shell’s Scotford facility is targeted for
additions as part of a planned C$7.3 billion
expansion of the Athabasca oil sands project.
Newton told the Edmonton Journal he does
not see the upgraders entering competition with
each other.
Noting industry and government forecasts
that oil sands output will increase from 1
million bpd to between 3 million and 5 million
bpd over the next 10 years, he said that so long
as the profile holds up there will be sufficient
bitumen for all of the upgraders.
North West President Robert Pearce shares
the view that “there’s room for more than one
project.” |
