For Ian MacGregor, the barrels of diesel that will start coming out of the Sturgeon Refinery late this year are a lot like pieces of wood-based furniture—when one thinks of selling raw bitumen as shipping logs.
MacGregor, president of North West Refining (NWR), first conceived of the oilsands value-adding project nearly 15 years ago.
He’s now eagerly looking forward to filling up his car with ultra low-sulphur Sturgeon diesel, but even more he’s eager to start moving on the project’s expansion phases.
It’s past peak construction at the site north of Edmonton, where just about 3.5 years ago NWR celebrated groundbreaking with its partner, Canadian Natural Resources, and government leaders.
About 7,000 pieces of equipment have been delivered, along with 1,150 modules. The process units have taken shape along roadways with tightly regulated traffic schedules. The operations building is a hive of activity, built to house all three regulatory-approved 50,000 bbl/d phases of the project.
Approximately 6,000 construction workers are still on site between day and night shifts, joined now by almost the full complement of 250 operations staff.
Earlier this year pre-commissioning work began to check as many as 20,000 process loops as the project advances toward completion.
There has been debate about the value of the Sturgeon Refinery to Albertans, since it has involved the support of the provincial government when many major oil companies—with the exception of Canadian Natural—were backing away from investing in bitumen upgrading.
The facility, which opted to incorporate carbon capture and storage systems in its design prior to the province enacting carbon pricing in 2007, will receive 75 percent of its feedstock through the government’s royalty-in-kind program, while the remainder will come from Canadian Natural.
Its capital cost, originally pegged at $5.7 billion, has increased to $8.6 billion. MacGregor says that today the owners are confident it will be completed within “plus or minus ten percent” of the latter figure.
Alberta will pay processing tolls and receive profit after those costs. Through the Alberta Petroleum Marketing Commission, the province partnered with Canadian Natural and NWR to finance the project, and also took the position of lender under subordinated debt agreements.
A report commissioned in late 2016 by NWR from the Conference Board of Canada concluded that the project has sound economics: after examining a broad range of pricing scenarios, it was determined that the refinery would be able to recover its investment as well as return a profit to both the shareholders and toll payers.
The Conference Board said the partnership represents “a unique and powerful combination of interests.”
NWR believes that now is the time to move on the next two phases. There is money to be saved on engineering and construction, but that won’t last forever, MacGregor says.
The Sturgeon Refinery represents three legs of a platform to elevate Alberta's future, he notes, particularly in the current low commodity cycle, where producers are also facing market access pressures and diesel has enough value to be economically transported by rail instead of through Canada's rapidly filling export pipelines.
“When you send a barrel of diesel you’re essentially sending 3.5 times as much economic value as when you send a barrel of [diluted bitumen] through that same system,” he says, adding that diesel is currently worth about $100/bbl while bitumen is worth about $35.
“The government committed the barrels that they collect through the royalty system, and we need them to do that again.”
Mike McKinnon, press secretary to energy minister Marg McCuaig-Boyd recently indicated to the Daily Oil Bulletin that the first phase of the refinery would need to be running before the province will consider additional support.
“Our government continues the commitment made to participate in phase one of the [project],” he said. “Success of phase one would be informative in any decision to participate in phase two.”
MacGregor doesn’t see the point in the pause.
“There’s no reason to wait. We know everything we’re going to know now,” he says.
“We have to go from the lumberjacks of the oil business to the furniture makers of the oil business. We have to keep progressing down that chain, and it’s an emergency now.”
JWN visited the Sturgeon Refinery this week. Here are 15 photos from the tour.
Doug Bertsch, vice-president of the North West Redwater Partnership, was the first employee associated with the Sturgeon Refinery project.
The Sturgeon Refinery is located next to the Sturgeon Terminal of the Access Pipeline, which transports oilsands SAGD volumes to the Edmonton region. It is a receipt point for the facility's feedstock.
In the Sturgeon Refinery control room, operators are conducting thousands of loop checks of the facility's units in preparation for start-up late this year.
The Sturgeon Refinery's emergency services building.
A coordinated busing program for Edmonton-region workers continues to be key to construction operations, with about 100 coaches transporting people to and from the facility each day.
The refinery's laydown yard continues to support construction operations.
At the height of construction there were more than 120 cranes on site. In February, NWR reported this had been reduced to 64 and was trending downward.
NWR president Ian MacGregor has made it his mission to "transform Alberta" through adding value to oilsands production.
The Sturgeon Refinery will start producing ultra low-sulphur diesel from oilsands bitumen late this year.