Sturgeon Refinery expected to add $2.3 billion of value-added impacts across Canadian economy every year
Phase One of the Sturgeon Refinery which will process bitumen and produce primarily diesel fuel in Alberta is nearing completion.
The project shows that additional economic value can be generated within the province, according to a Conference Board of Canada report, Is There Value in Adding Value? An Assessment of the Sturgeon Refinery.
“Alberta is considering its options to add value to its resources and to diversify its economic base. Adding value to bitumen by refining it within Alberta at the Sturgeon Refinery clearly creates benefits,” said Len Coad, Research Director, Public Policy.
Long term supply commitments and long term cost of service processing agreements are two of the main reasons that the project has been able to achieve a low cost of capital, using only 20 per cent equity and debt rates below 5 per cent. The unique financial and processing agreement structures are fundamental to the value proposition of the refinery.
“Over a broad range of pricing assumptions, the refinery would be able to recover its investment as well as return a profit to both the shareholders and toll payers. The Sturgeon Refinery creates value because of a combination of guaranteed supply, risk allocation, revenue sharing, cost recovery, and financing,” said Coad.
Another unique feature of the Sturgeon Refinery is that it has been designed to capture approximately 1.2 million tonnes per year of CO2 per phase.
This CO2 will be sold to Enhance Energy Inc. and injected into depleted oil reservoirs for enhanced oil recovery.
It will also produce diesel oil that is expected to meet current low carbon fuel standards. These carbon-related benefits are incremental to the economic impacts quantified in this report.
The refinery is designed to ultimately consist of three identical phases. The first phase is to be completed and brought into operation in late 2017.
The Alberta Petroleum Marketing Commission and Canadian Natural Resources Limited will supply the first phase of the refinery with feedstock for a period of 30 years.
The initial phase of the Sturgeon Refinery is designed to process 78,630 barrels per day of diluted bitumen, which will contain a minimum of 50,000 barrels of raw bitumen.
The report evaluates the business case of the first phase of the Sturgeon Refinery and quantifies the economic and fiscal impacts associated with the construction and operation of the project.
For the construction phase, total capital expenditures of $8.6 billion between 2007 to 2017 are estimated to produce:
- $7.9 billion in total value-added (or GDP) impacts across the Canadian economy;
- 75,774 person-years of total employment impacts, and;
- $1.9 billion in various forms of federal and provincial government revenues (excluding royalties).
For the operations phase (2017–47), the report considers two scenarios: Scenario 1 considers the impacts of both the refinery and related bitumen; Scenario 2 considers only the impacts of the refinery.
In Scenario 1, an estimated $2.2 billion in average annual operating expenditures (including the bitumen feedstock costs) are estimated to generate:
- $2.3 billion in total value-added impacts across the Canadian economy every year;
- 6,658 jobs per year of total employment impacts, and;
- $385 million in various forms of federal and provincial government revenues (excluding natural resource extraction rent payments or royalties).
For Scenario 2, an estimated $0.9 billion in average annual operating expenditures (excluding the bitumen feedstock costs) are estimated to generate:
- $0.9 billion in total value-added impacts across the Canadian economy every year;
- 1,797 jobs per year of total employment impacts, and;
- $140 million in various forms of federal and provincial government revenues (excluding natural resource extraction rent payments or royalties).
This report was commissioned by North West Refining to provide an independent evaluation of Phase One economics.