Made-in-B.C. refinery gets thumbs-up in consultant’s report
A multibillion-dollar Kitimat oil refinery proposed by newspaper publisher David Black has great economic potential and should be seriously considered by the province, says a report commissioned by the B.C. government.
"Such a refinery would provide incremental long-term economic benefits to the region, compared to export of unfinished (crude oil)," concluded the report by Navigant Consulting Inc., of California.
"In addition and equally importantly, if configured carefully and managed properly, the refinery would create sustainable margins that otherwise would be lost to Asian purchasers of Canada's oilsands production," said the report on Black's proposed Kitimat Clean Ltd. project in northwest B.C.
A properly designed refinery would be "capable of manufacturing fuel products for a myriad of countries around the Pacific Rim," the report states.
And it could cost considerably less than the $16-billion price tag that Black recently gave, although providing a precise cost estimate at this early stage is difficult. (Black prices the entire project at $25 billion, with the rest spent on oil and natural gas pipelines and tankers).
The report's release comes days after Premier Christy Clark came close to endorsing the proposed oil refinery development, maintaining that it nearly meets the province's five conditions for allowing heavy oil initiatives.
In a statement released late Monday, Clark said she is encouraged by the Navigant report, adding that it "confirms David Black's belief that the refinery can be profitable and also be in the interests of British Columbians.
"As I said last week, Kitimat Clean could be a game changer with respect to the debate around heavy oil. We are encouraged by this report and look forward to working with Mr. Black to ensure our five conditions are met by his proposal, including world-leading environmental standards, First Nations participation, and a fair share of benefits for British Columbia."
Energy and Mines Minister Rich Coleman said that for him, the report's biggest point is that the proposal is viable. He said he also likes the recommendation that the refinery not be tied to any one market. "It confirms what I've thought."
Asked if the report was released to coincide with the coming election, Coleman said the government commissioned the report and "there's no point in sitting on it."
But NDP energy and mines critic John Horgan said the government's release of the report now "is an attempt to ignite an election issue rather than focus on governing."
The project is eight years out, he said, and the government should be focusing on more pressing matters. "We're a good distance away from this being relevant. I wish (Black) well, (but) there's not a lot of resource analysts that say this project is a winner."
Last fall, Black floated the idea of building the Kitimat refinery in northwest B.C. to reframe the discussion on Enbridge's controversial $6-billion proposed Northern Gateway oil pipeline by promising 10 times as many jobs as the pipeline and eliminating the shipment of oilsands crude off the coast.
The idea is to process all of the 550,000 barrels a day of Alberta oilsands bitumen from the pipeline at the refinery, and then ship the lighter refined products such as gasoline, diesel and kerosene to Asia.
Black - who recently said he's on the verge of signing a financing memorandum of understanding with Switzerland-based Oppenheimer Investments Group - argues if there was a tanker spill, the refined products would cause less environmental damage than oil because they float and evaporate.
The government commissioned Navigant to prepare a technical review of the project, including an estimate of its economic performance, and to compile an assessment of the Asian fuel supply and whether the output from Kitimat could be sold profitably to four Asian countries: China, India, South Korea and Japan.
"It is Navigant's opinion that the refinery configuration recommended by Kitimat Clean Fuels (KC) is technically sound. They have suggested using a combination of hydrocracking and delayed coking to process oilsands from Alberta into various clean fuels. This particular configuration is well-proven and widely employed in many locations around the world."
The Navigant report analyzed the fuel supply and demand balance for the four Asian countries from 1990 to 2010, concluding that demand for imports has been stable at roughly two million barrels per day for the last 15 years.
"Thus the output from Kitimat (0.5 million barrels per day) could be accommodated by markets in Asia/Oceania without major disruption to local spot markets."
The report concluded that the refin-g sector in the four countries lags the U.S., western Europe and Canada, both in terms of technical upgrading capability, as well as size. "Thus a sophisticated export refinery on the Pacific Rim could help fill the region's ongoing import needs."
The report said the refinery "would not only create employment and economic benefits for the province, but would also increase the overall value of Canada's natural resources, versus exports of crude oil and/or bitumen."
Another advantage, it said, is that large crude oil tankers needed to transport bitumen wouldn't be needed and that "vessels used to export products would, on average, be considerably smaller.
"Given the smaller parcel sizes with products, however, the number of vessel movements would by necessity have to increase."
However, the report noted that potential markets have not yet been determined so profitability would be dependent on market selection.
"Since its production could, in theory, be delivered to any of the importing countries around the Pacific Rim, one approach to maximize margin would be to design the refinery to ensure that it can blend finished products to meet the likely specifications in any of these countries. Such an approach has been used successfully in many export refineries around the world, particularly in resources-rich countries of the Middle East."
The report follows a poll commissioned by Black and released earlier this month concluded that more than half of British Columbians support the Kitimat oil refinery.
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