Three business items caught my attention while watching early morning business news. A report of an increase in price and possible shortages again this winter of diesel; the continued comments by provincial government officials about the loss of revenue because current low prices of bitumen; and, third, that Alberta heavy crude futures are selling at a $36 discount. This does not bode well for the Alberta Treasury which has set our royalty revenue on price rather than a per barrel royalty.
Alberta has already approved the delayed XL pipeline export of heavy crude to the U.S. Midwest and we also have the growing issue of producing more oil than we can export along with the expected delays of the approval of the Northern Gateway pipeline to Kitimat. The proposal of Enbridge to build two pipelines, one to ship bitumen to the Far East and the twin line to ship diluents back, further adds to the cost and the increased possible contamination from spills. Refining bitumen to high end finished products here in Alberta should be the only option.
Albertans should be questioning why we are allowing Enbridge for example, to export bitumen, contrary to the advice of noted economists. Raw bitumen can be refined to produce diesel, gasoline and jet fuel as primary products as along with highly valued byproducts of naphtha, butane, propane ethane and diluents, all of which are seeing growth in demand.
In November, North West Upgrading and Canadian Natural Upgrading brought some great news to this scene and our area by announcing that their huge project just northeast of St. Albert in Sturgeon County would go ahead early this year. Not just as an upgrader but as a fully integrated refinery of which the primary production will be diesel. Diesel has been in short supply in Alberta, especially in the winter months when we have seen large tractor trailer units fueling up at box stores and heard of school bus delays because of diesel shortages.
The decision of North West Upgrading to go to a full-scale refinery operation and produce diesel is a brilliant move and truly maximizes the value of raw bitumen. Sturgeon County whose people have worked hard on this project for over ten years, deserves a lot of credit for their support of this important project.
This news should also give Enbridge cause to reconsider its plan to export bitumen and consider the possibility of exporting diesel to the Orient. Diesel, which is in growing demand in the Far East, presents an opportunity we should not miss. China and India, along with many Far East countries, are huge potential markets for diesel, and Japan would like to shut down several nuclear electrical producing stations that are susceptible to either earthquake or tsunami flood damage and convert to diesel.
It is interesting as well that North West Upgrading could easily modify its process for specific periods to produce jet fuel and when we consider what Delta Airlines has done in long-term fuel planning, this could present a great opportunity for WestJet to secure its long term-fuel needs. One other major advantage for Enbridge, and best of all, the fuel stock for the plant will be in the form of bitumen which the Alberta government will receive through its Bitumen Royalties in Kind (BRIK) program. Everyone is a winner.
Bob Russell, St. Albert
