Edmonton, Alberta—Low-sulfur specifications for marine oil proposed last year by the International Maritime Organization will open up opportunities in Alberta to invest in new refining and upgrading facilities, as increased heavy oil output in the province will start seeking global markets, industry officials said last week.
“The new IMO regulations that stipulate reducing the sulfur content from 3.5% to 0.5% from 2020 present a great opportunity for us and evaluations are underway for producing such products for the second and third phase expansions of our upcoming refinery,” Ian McGregor, chairman of North West Refining, said at the annual stakeholder event in Edmonton hosted by the Alberta Industrial Heartland Association.
NWR, which is a 50:50 joint venture between oil sands producer Canadian Natural Resources and Calgary-based North West Upgrading, is building a 240,000 b/d heavy oil refinery in three equal phases with the first phase due for start up in late 2017. The facility is located in the Sturgeon County in the province’s industrial heartland area.
“For the next two phases, we have already worked out the cost and are now scoping the market for opportunities to sell our planned low-sulfur products,” McGregor said, without providing any figures.
NWR has spent C$7.5 billion ($5.7 billion) for the first phase of the refinery project, with the products being marketed ‘largely’ in Western Canada, he said.
The refinery’s end products from the first phase will be 40,000 b/d of diesel, 10,000 b/d of vacuum gas oil and the remaining volumes naphtha and LPG.
“The product slate for phases 2 and 3 will not be any different, but with significantly lower sulfur specifications,” McGregor said. “The cost for the next two expansions of our refinery will also be lower [compared with phase 1] as we will draw from the synergies of some facilities like pipelines and substations.”
Higher margins seen
Lisa Doig, manager commercialization with Calgary-based Field Upgrading, said reducing sulfur content in line with the IMO regulations will also present an opportunity for an investor in a refinery in Alberta to fetch a higher margin for their refined products.
“There is a potential of C$10/b to C$15/b for upgrading/refining heavy crude,” she said on the sidelines of the same event, noting Field Upgrading is currently working on a demonstration project in the Alberta industrial heartland area.
“We are using our proprietary DSU process that upgrades and takes out 90% of the sulfur and other metals from the heavy barrels and changes the API from 15 degrees to 5 degrees and makes it almost ready to flow through pipelines,” Doig said while addressing the event.
By March 2017, Field Upgrading will complete a feasibility study for its demonstration project, Doig said, to be followed by a detailed engineering study and seeking regulatory approval to a 2,500 b/d facility in the province to be called Clean Seas project. The facility is targeted for start up in 2019.
“If this goes well, in the next stage we will build a 10,000 b/d to 15,000 b/d facility with the low sulfur products that can be replicated and sold globally,” she said.
Output from the facility can be put on rail cars and shipped to ports in Vancouver and Montreal, Doig said.
“Shell, Chevron and Cenovus Energy are interested in such projects in the province,” Doig said. But she did not confirm if these oil sands producers would invest in Field Upgrading’s project as it goes out to seek funding to build its demonstration facility.
No comments were immediately available for any of the three producers.
Written By Ashok Dutta