Daily Oil Bulletin – Keyera/Sasol Land Deal Among New Developments Announced At Alberta Industrial Heartland Event

January 20, 2017

Edmonton — With multiple major projects underway and several more proposals on the horizon, there’s a great deal of optimism in the future of the Alberta Industrial Heartland region northeast of Edmonton.

But two sections of land once slated for a multibillion-dollar project are fated to remain unused for now.

Sasol Canada has sold 1,290 acres of land once planned for a proposed gas-to-liquids facility to Keyera Corporation, the audience at Alberta’s Industrial Heartland Association’s (AIHA) 18thannual stakeholder meeting heard yesterday in Edmonton.

The two companies agreed to the sale in December 2016, and the deal closed yesterday morning. Located in northern Strathcona County, the two sections of land have access to pipeline and rail through Keyera’s adjacent Josephburg Terminal.

“We’re very excited about this piece of land and hope it brings us many opportunities in the future,” said John Hunszinger, director of Keyera’s Alberta EnviroFuel Plant, during a corporate update at the AIHA event. No immediate plans for the land were announced.

Garret Matteotti, AIHA’s director of business development, said he was “disappointed” by Sasol’s exit from the region, but he was encouraged by Keyera’s interest in the lands.

“What we see from this is extreme confidence from our existing industry in the heartland region and opportunities for continued growth,” he said.

Another new development for the region was also announced yesterday. Field Upgrading, which launched a 10-bbl a day pilot plant in the heartland over a year ago, revealed it would be moving forward with a 2,500-bbl per day demonstration plant.

The company has developed a technique to partially upgrade bitumen or other high-sulphur feedstocks through the application of sodium, which removes about 90 per cent of the sulphur and metals during the process. The resulting bitumen has a higher API value and needs only about seven per cent diluent to be pipeline-ready, as opposed to the 30 per cent diluent content of most dilbit, explained Lisa Doig, commercialization manager for Field Upgrading.

Dubbed the CleanSeas project, the new demonstration plant will target the bunker fuel market, Doig said.

The International Maritime Organization, the agency responsible for regulating the global marine shipping industry, has announced tighter regulations around the sulphur content of bunker fuel. All ships will have to go from using fuel with 3.5 per cent sulphur content to 0.5 per cent sulphur content when the new rules come into effect in 2020.

Field Upgrading expects to wrap up the feasibility stage for CleanSeas by the end of Q1 2017 before moving on to the front-end engineering and design phase and regulatory approval later this year. A final sanctioning decision will be made before the end of 2017. Construction is expected to be complete by the end of 2019 so that the facility can be operational before the new bunker fuel regulations come into effect in 2020.

“We’re doing this as a scalable process, and 2,500 barrels a day is a good building block, we think. If it goes well, a typical plant size would be 10,000 barrels a day, so we would just replicate that,” Doig said.

On the larger end of the project scale, the $8.5-billion Sturgeon Refinery development also provided an update on its current progress at the AIHA event.

According to Ian MacGregor, president, chief executive officer and chair of Northwest Refining, $7.5 billion of the project cost has been spent so far and 100 per cent of the refinery’s 1,041 modules have been installed. The project remains on schedule and on budget as it works toward becoming operational by the end of the year.

To date, 21 million person-hours of labour have been completed on the project, and the on-site workforce peaked at 7,500 people in December. There are now 5,500 to 6,000 workers on site currently, including 2,500 electricians.

The current focus is on turning over the facility from the construction team to operations. MacGregor noted that there are 7,000 pieces of equipment costing over $100,000 on site, and each one will have its own unique problems that will need to be addressed in order to start up. In total, there are 1,260 work packages that will need to be completed to turn over all of the equipment to operations.

During his talk, he also emphasized the impact of changes to bunker fuel regulations on Alberta bitumen, although he sounded a more cautionary note than Field Upgrading’s Doig. He said that the changing regulations would mean that the heavy bottoms currently used for bunker fuel will need refining.

“Somebody’s going to be short of refining space because we’re going to need 3.5 million barrels per day of refining [capacity for the bunker fuel], and it all competes with bitumen. Bitumen’s high sulphur, and the heavy bottoms are high sulphur too,” MacGregor said, adding that there is also an opportunity for Alberta because bitumen could be used to meet the fuel needs of the shipping industry.

MacGregor also warned of the impact of low carbon fuel standards in places like California, Ontario and Quebec on the province’s bitumen. Such rules put bitumen at a significant disadvantage because it must be blended with biodiesel to meet the requirements. He estimated it could cost as much as $25 per bbl to add biodiesel to bitumen.

Because of the Sturgeon Refinery’s carbon capture capabilities, its output would only require an extra $2 per bbl to meet low carbon fuel standards. Adding a cogeneration plant to the refinery would actually lower the carbon intensity of its output to such a level that it could actually become a blending fuel, he said.

“We think it’s important to get to the right place on the carbon intensity of the fuels, because it’s going to cost a lot of money if you don’t,” MacGregor said.

As the Sturgeon Refinery winds down its construction activity, AIHA is looking to several proposed projects on the horizon to keep the region growing. These include:

  • ATCO Power’s 400-megawatt natural gas fired Heartland Generating Station;
  •  Inter Pipeline’s propane dehydrogenation (PDH) facility;
  • Pembina Pipeline Corporation and Petrochemical Industries Company’s joint venture on a PDH and polypropylene facility.

Together, the three projects represent $9 billion in capital investment and 6,000 jobs for the region, according to AIHA’s Matteotti. None of the projects have been sanctioned by their respective owners, but Inter Pipeline expects a final investment decision on its proposal by mid-2017.

Justin Heskes, manager, storage solutions, ATCO Energy Solutions, said that the construction start date for the Heartland Generating Station has been rescheduled for 2018. The company’s proposed in-service date is now 2022.

“The investment decision on this project has been delayed slightly in context of uncertainties around some of the power business, but continues to be a key focus for the company going forward,” he said.

Article Source: http://www.dailyoilbulletin.com/article/2017/1/20/keyerasasol-land-deal-among-new-developments-annou/

Written By Joseph Caouette