B.C. firms propose new plans to access Asian energy markets
By Chris Friemond, Managing Editor
The skeptics who believe it’s not financially viable to build and operate an oil refinery on British Columbia’s north coast simply don’t understand the business model, says Robert Delamar, CEO of Pacific Future Energy, whose company is planning to do just that.
“We are well past the need to defend the economic viability of our project,” he says. “We are not talking about building a 20th century topping plant that sources international feedstock at Brent pricing. We are proposing to build the world’s greenest, most technologically advanced export refinery to be fed exclusively with Canadian bitumen.”
Mr. Delamar says analysts that the company has spoken to at many of the world’s largest investment banks understand that a 21st century refinery, designed to easily modify a product slate in response to changing market demands and oriented to Asia, can be a very lucrative business, and that’s the independent analysis and validation driving the company’s economic decision-making.
Pacific Future Energy’s proposal is one of three currently on the table in B.C. that aim to open a route for product from Alberta’s oil sands to Asian markets. The other two are a plan by Kitimat Clean, a company established by Victoria-based businessman David Black, to build and operate an oil refinery in Kitimat in northern B.C., and a proposal by Eagle Spirit Energy Holdings, a First Nations-lead initiative backed by Vancouver’s powerful Aquilini family to build a pipeline between an oil upgrader in northern Alberta and B.C.’s north coast from where the partially refined product would be exported.
Like Pacific Future Energy’s proposed refinery, Mr. Black says his $21-billion facility with a processing capacity of 550,000 barrels per day of diluted oil sands bitumen would be the cleanest upgrading and refining site in the world and the lowest cost producer of any refinery on the Pacific or Indian Oceans.
Kitimat Clean is also prepared to build a pipeline to transport the product from Alberta to B.C. and pay for a tanker fleet to ship it to Asia, all at an additional cost of $11-billion. Annual revenue would be $25-billion, with a return on investment of 10 per cent after income tax. The $32-billion capital cost would be borrowed, and all loans be repaid within 10 years.
Calvin Helin, chairman and president of Eagle Spirit Energy Holdings, says the company
is working to win backing for the project from First Nations communities in B.C. and Alberta. At the project’s launch in Vancouver earlier this year, he said engagement with First Nations would be ongoing.
“We have a lot of work ahead of us and will continue to be respectful of First Nations protocols and seek their consensus, taking their lead to bring forward amicable solutions for the benefit of all communities,” Mr. Helin said.
The company has already signed non-disclosure agreements with a “substantial number” of First Nations in northern British Columbia, according to Mr. Helin.
“These First Nation communities are prepared to work together with Eagle Spirit Holdings to explore alternative solutions to Enbridge’s planned Northern Gateway proposal.”
Mr. Delamar says his company’s proposal is a sensible approach to the ongoing challenge of accessing Asia.
An export refinery on the B.C. coast would become an important global link in the delivery chain for Canadian upstream producers who currently have a small domestic market and only the U.S. as an export market.
“We are building important relationships with the major Asian trading houses, and expect to have Asia-sourced off take agreements in place long before the first barrel of Alberta bitumen is processed in our refinery,” adds Mr. Delamar. “Asian demand for petroleum products is forecast to grow by one million barrels per day in 2014 alone.”
All three companies are banking on support from British Columbians for proposals to export refined or partially refined products rather than oil sands crude. Public opinion poll results released earlier this year by Pacific Future Energy showed strong support for refining oil in Canada before exporting it because of the perceived economic and environmental benefits.
“An export refinery on the B.C. coast built in full partnership with First Nations would protect the delicate coastal marine ecosystem from the threat of a catastrophic bitumen spill, while creating thousands of good-paying, long-term jobs and opening new markets for Canadian producers,” says Mr. Delamar. “Instead of relying on a single export market for Canadian bitumen, we would open the door for new business for Canadian producers in the world’s most dynamic economic region, Asia. It is a win for everyone.”