A proposed upgrader project took another step closer to reality last week as the Alberta government paved the way for more negotiations with North West Upgrading.
The provincial cabinet and caucus both gave their approvals for negotiations with the company after it was selected to receive 75,000 barrels from the Bitumen Royalty in Kind (BRIK) program.
A deal could be finalized as early as this fall, which would allow construction to get under way on the first phase of what would ultimately be a 150,000-barrel-per-day facility.
Several years ago when the company last issued an estimate, they suggested the first phase of 50,000 barrels could cost $4.2 billion to build and generate 2,000 construction jobs.
St. Albert MLA Ken Allred said having the government’s BRIK program help the North West project, could help get other developments under way.
“With the downturn in the economies and all of the upgraders that were proposed prior to the downturn, this one is now back on the books and hopefully will be a catalyst.”
Originally, four upgraders were proposed for the region, but none of the others are as close to construction as North West and only one other project, the Fort Hills plant, has regulatory approvals in place.
Neil Shelly, executive director of the Alberta Industrial Heartland Association, said if North West succeeds, it could generate more interest in future rounds of the BRIK program.
“Everybody is watching this one to see if it will make sense and will, in the end, the government and the people of Alberta be happy with what they saw.”
He said he expects the contract will take some time to complete because it is the first.
“This is the first time the government of Alberta has done one of these BRIK projects so it is not as though there is a contract they can just pull off the shelves.”
As a counter, he said critics of the BRIK program would have more ammunition if the project doesn’t succeed.
“I am sure the critics will be out saying this wasn’t a good idea and we should just go back to the old way and letting the market decide where the investment takes place.”
Allred said he expects the government will be reasonable with North West, but will also want to get good value for the bitumen it will be selling.
“Certainly the government is interested in getting North West up and going. I don’t think there will be any roadblocks, but it has to be a reasonable deal.”
He said there is a good potential for strong economic benefits to flow throughout the region from North West that will be important for St. Albert as well.
Shelly said with several other major projects poised to wrap up soon, having North West get under way could also keep construction workers busy.
North West executives were unavailable for comment because the company does not want to talk about the negotiations while they are taking place.
