Increase to Alberta’s GDP of $505 million/year, 179,000 person-years of employment created from just one 100,000 b/d partial upgrader
Full upgrading of Alberta oil sands bitumen has proven too costly in most cases, but a new study from the University of Calgary finds that the economics of partial upgrading are very beneficial to the industry and the provincial economy.
In 2015, almost 60 per cent of Alberta oil sands production was non-upgraded bitumen. The market for synthetic crude oil produced by full upgrading is only getting tougher, according to the new report, entitled “Public-Interest Benefit Evaluation of Partial-Upgrading Technology,” authored by G. Kent Fellows, Robert Mansell, Ronald Schlenker and Jennifer Winter.
One of the four recommendations from Alberta’s 2015 royalty review panel was for the government of Alberta to examine opportunities to accelerate the development and commercialization of partial-upgrading technologies.
The NDP government of Rachel Notley has repeatedly said it hopes to add value and keep jobs in Alberta. Full upgraders have proved uneconomical without substantial public subsidies but partial upgrading offers a potentially economical middle ground.
According to the authors: “The market for the synthetic crude oil produced by full upgrading is only getting tougher. Any Alberta bitumen fully upgraded here would compete directly with the rapidly expanding supply of light U.S. unconventional shale oil. Partial upgrading does not upgrade bitumen to a light crude, but to something resembling more of a medium or heavy crude, and at a lower cost per barrel than full upgrading. Currently there are gaps in several North American refineries that could be filled by this partially upgraded Alberta oil.”
Based on the model of a single 100,000-barrel-a-day partial upgrader, the value uplift could be $10 to $15 per bitumen barrel.
Meanwhile, there could be an average annual increase to Alberta’s GDP of $505 million, and as many as 179,000 person-years of employment created (assuming a 40.5-year operating period).
The increase in taxable earnings would increase provincial revenues by an average of $60 million a year, not including additional federal tax revenues.
If successful, there could be many such partial upgraders with corresponding multiplication of these benefits.