Q&A: The case for more Alberta refineries
'We've got to sell finished goods,' says chair of North West Refining
Alberta Premier Rachel Notley this week breathed new life into an old NDP pledge to try to build more refineries in the province.
More refineries would mean more jobs, more options for Alberta bitumen and more wealth for the province — or so the government's argument goes.
She's canvassing the industry for private sector interest until Feb. 8. Depending on the feedback, the government may then issue a formal request for proposals. Notley hasn't yet said how the government would financially support a new project.
The reception to the idea so far has been skeptical.
Economist Kent Fellows is among the experts who says he struggles to see a business case.
"We've heard a lot of rhetoric about full refining in Alberta for a number of years, and in Western Canada for a number of years," said Fellows, a research associate at the University of Calgary's School of Public Policy.
"But we really haven't seen the private sector all that interested in playing a role, at least not without some some government intervention. That to me is a sign that maybe the economics are not all that strong."
But Ian MacGregor feels much differently.
The chairman of North West Refining, co-owner of the $9.7-billion Sturgeon refinery near Edmonton, believes more domestic refining is exactly what's needed.
The Sturgeon refinery, which took more than a decade to plan and build, is the first constructed in Alberta in more than 30 years and is currently ramping up to accept heavy oil.
The Alberta government helped the first phase of the project with a 30-year bitumen-royalty-in-kind agreement, which has been a source of controversy.
But MacGregor feels Alberta's costly troubles with pipeline bottlenecks are evidence of a need for more refining options at home, instead of sending most of Canada's oil stateside.
CBC News asked MacGregor for an update on the refinery, the need for new facilities and his thoughts on the premier's announcement. The interview has been edited for length and clarity.
Can you bring us up to speed with the work at Sturgeon refinery?
"We're in the final phases of startup right now. We've had part of the refinery running for about a year now, and we're in the final phases of a startup on the heavy oil processing part of it. So we've been running on synthetic crude and we're changing over to bitumen [in the next couple of months]."
What will be its capacity?
"We take 80,000 barrels a day of dilbit (diluted bitumen) in and then we make that into about 80,000 barrels a day of products. Part of those products are the diluent that we recover and send back. And so we make about 28,000 barrels a day of diluent and then the rest is refined products, and mostly diesel."
Why do you believe refining is important for Alberta?
"I believe that refining is the future of the place, the future of Alberta, probably has a big part of the future of Canada. So I'll use my lumberjack analogy. If oil was trees, we've got great forests in Alberta. What we do is we cut them down and we ship out raw logs. And we've plugged up the whole transportation system — pipelines, rail and everything — it's full of raw logs right now. And then we rely on somebody with a sawmill somewhere else to saw them up into boards.
"We've got to sell finished goods. We've got to build sawmills here and make things that people want. And, really, what we should be building is furniture factories. And that's what I build."
What do you think of the premier's announcement?
"I think all refining in the province is good for Alberta. All refining in Canada is good for Canada. We should be making export products, and we should be trying to get to the end market and not relying on others to do processing for us or it's going to end bad."
Why is that? Why is this something we must do?
"Because we've seen constraints. We've seen what a constraint does in the transportation system. People in the government have been saying not having Trans Mountain cost us $80 million dollars a day. So we have to figure out a way to make something that's valuable enough that we can ship it and get it out of here."
"If we refine 100,000 barrels, we avoid shipping about 125,000 barrels because we don't ship diluent around in a circle. What that means is we can make the transportation system bigger by refining things here. It's a lot more valuable because what we're sending down the transportation system is worth three times as much as the raw materials that we send down."
Despite the length of time it's taken to build the Sturgeon refinery and the amount of investment, is it worth it?
"Absolutely, there's no question. Anybody who looks at the numbers … is going to be in favour of this economically.
"We can't consume everything we can make here. We're going to have to export it. But if I'm putting something in that pipeline I can either put bitumen in or [Western Canadian Select] that's worth $40 a barrel, or in the same pipeline I can put diesel in that's worth $120 a barrel.
"This refinery was [also] designed from the get go to collect as much carbon as it could. And the diesel that comes out of it is lower in its C02 impact than any other diesel. And so that's going to be a market advantage in the future."