Copyright of the Daily Oil Bulletin 2018
First Diesel For Sturgeon Refinery
Morinville — The Sturgeon Refinery has produced its first diesel, a major milestone as the project inches toward its planned mid-2018 start-up.
The diesel was produced from synthetic crude oil on Nov. 22, 2017. Once the refinery is fully operational, it will be producing 80,000 bbls/d of diesel and other products from 50,000 bbls/d of bitumen feedstock.
“So far, so good,” said Kerry Margetts, president of the North West Redwater Partnership, in reference to the early stages of commissioning. “We’ve had a good start-up in terms of the first few units here, but we still have a long way to go.”
On Tuesday morning, the project celebrated the milestone at UFA Petroleum in Morinville, Alta., where it supplied free fuel to several local community service vehicles, including fire trucks.
However, not all of the diesel produced at the refinery on Nov. 22 was dispensed at the UFA Petroleum site on Tuesday. In fact, the very first diesel to come out of the refinery is stored in a container sitting on the desk of IanMacGregor. The chair and chief executive officer of North West Refining Inc. has been one of the project’s most visible and vocal proponents from the very start nearly 15 years ago.
File photo. Deborah Jaremko photo.
“It’s been a long journey, and I’m really happy to see it there,” he said. “It just means you could really do what you dreamed about doing in this place.”
According to MacGregor, between 60 to 70 per cent of the process units on site are operational. Two of the heavy processing units, the gasifier and the ebullated-bed hydrocracker, are not yet in operation, but he expects them to be completed in about six weeks.
“There’s never been an example of one of these things that doesn’t work,” he said. “There are hundreds of problems every day that these guys are solving, and we’ll work through them in the end. Fifty years from now no one will remember anything except how much money and diesel came out of it.”
Currently, there are 3,700 people working on site, MacGregor noted. About 1,000 of the workers, including nearly 400 regular staffers, are focused on start-up duties. Only 1,500 construction workers remain on the project, compared to the over 8,000 who were employed during peak construction.
During much of its construction, the refinery was dogged by questions of economic viability and saw its costs rise from $5.7 billion to $8.5 billion and now to $9.3 billion, according to a report released by AltaCorp Capital Inc. in June this year.
MacGregor, who has been involved with the Sturgeon Refinery from the start, defended the project by comparing it to the Channel Tunnel connecting the United Kingdom and France, which similarly saw cost increases during construction.
“No one remembers that now. They only think how there’s 100 trains a day going through the tunnel and the amount of commercial activity that it creates,” MacGregor said. “That’s what I believe we’ve created here. It’s an engine of the economy for the future.”
If sanctioned, the second and third phases of the Sturgeon Refinery would bring the plant’s total output to 250,000 bbls/d. MacGregor noted that his ultimate goal was to see one million bbls/d of new refining in Alberta.
The project could help prove the viability of new homegrown refining capacity in Alberta, MacGregor argued. He is optimistic that others would be encouraged to step up with their own projects if the Sturgeon Refinery is successful.
“I believe there is no reason we can’t do it except our own lethargy,” he said. “We’ve got to start looking on the horizon and asking what we have to make for the future to get this place to work. We can’t be sitting around waiting for stuff to happen. We can’t be waiting for the oil price to go up. It isn’t going up. Let’s figure out how to react to the conditions we’ve got.”
Once the first phase is fully operational, 75 per cent of the refinery’s feedstock will come from the Alberta government’s bitumen royalty-in-kind program as part of a 30-year guaranteed toll agreement. MacGregor noted that this will only account for 10 per cent of the provincial government’s royalty bitumen supplies. If the second and third phases were approved, the figure would rise to 25 per cent.
For now, there is no clear indication if or when the second phase would receive approval. However, MacGregor did note that North West has given the government its detailed proposal for the expansion.
“We sent it into them and they’re thinking,” he said.
“Until phase one has demonstrated its viability and it’s up and running, there will be no official discussions of [the second phase], but I do understand that the minister of energy is open to talking,” he said. “It’s a bit premature at this stage.”