An upgrader in Sturgeon County took a step closer to construction last week when a major industry player signed on to pay half of the costs.
North West Upgrading announced last week that Canadian Natural Resources Limited (CNRL) was signing on to its proposed upgrader and agreeing to pay 50 per cent of the costs of the proposed 50,000-barrel per day plant.
CNRL also agreed to provide 12,500 barrels per day of raw bitumen to be upgraded at North West’s plant.
The plant is just the first stage of the company’s three-phase proposal that would ultimately upgrade 150,000 barrels.
CNRL has agreed to continue to supply the plant with 25 per cent of its needs for raw bitumen, so the 12,500 would rise as the plant expanded.
The proposed upgrader in northeast Sturgeon County is a merchant upgrader, without a dedicated mine to supply the raw bitumen. This is the first major commitment of raw bitumen.
North West vice president of regulatory affairs, Doug Bertsch said the announcement with CNRL is a big piece of the puzzle towards getting the upgrader up and running.
“It removes the uncertainty about a good portion of the project, but there are still things North West would like to have in place before the project is considered a full go.”
North West is now eagerly awaiting the results of the province’s proposed bitumen royalty in kind (BRIK) program, which would take royalty barrels the province collects and direct them to upgraders.
The province was accepting submissions for the proposed barrels until just last week and is expected to make a decision in late May.
Bertsch said if the province signs a contract with North West to upgrade royalty barrels, the project could be up and running very quickly.
“We would still have to go to the finance marketplace and raise the balance of capital, but with a partnership with CNRL and an attractive contract from the province the project would be quite financeable.”
The total cost of the upgrader was last estimated to be over $4 billion.
The company could also get raw bitumen from other sources, said Bertsch, but he emphasized the royalty barrels are significant.
“We believe there are other potential sources and should the BRIK barrels not work out we would explore other options, but I have to emphasize that the BRIK barrels are very important.”
Bertsch said North West should be a strong contender for the royalty barrels.
“We feel we have submitted a very strong proposal for the maximum value addition in the province.”
He said an industry heavyweight like CNRL signing on to the project should also make clear they have a good plan.
“We believe that should be a significant sign to the province of the value of the North West business plan.”
The proposed upgrader received approval from the provincial government. Sturgeon County has rezoned the land and some minor construction has even started.
