Sturgeon Refinery produces its first gallon of diesel - sort of

Sturgeon Refinery produces its first gallon of diesel - sort of

North West Refining announced first diesel production from its Sturgeon Refinery earlier this week.

The $9.3 billion "refinery" (formerly known as the North West Upgrader) is designed to upgrade 50,000 bbl/day of bitumen into 40,250 bbl/day of ultra-low sulphur diesel for use in local markets. 

 GRAPHIC COURTESY NW REFINING

GRAPHIC COURTESY NW REFINING

A SMALL UPGRADER WITH A BIG PAST

The Sturgeon Upgrader is a 50/50 joint venture between North West Refining and Canadian Natural Resources (CNRL), developed in partnership with the Alberta government. 

The province will provide 75% of the project’s feedstock through its bitumen royalty-in-kind program (BRIK). The remaining 25% will come from CNRL, mostly from its in-situ operations in Cold Lake. The provincial government (aka Alberta taxpayers) has committed to paying $26 billion in tolls to process the bitumen over the 30 year life of the project.

The public-private partnership was the brainchild of Alberta's former PC government under the guidance of Premier Ed Stelmach.

Prior to the 2008 oil price crash, almost a dozen upgraders were planned for construction or expansion north of Edmonton and near Fort McMurray. Post-2008, only two of those projects ever saw the light of day - CNRL's Horizon Upgrader and OPTI/Nexen's now defunct Long Lake Upgrader. The rest were cancelled indefinitely. Sturgeon was intended to help rescue some jobs in the Edmonton area and "value-add" bitumen produced from oil sands in-situ facilities into a final product. At peak construction, the project employed over 8,000 workers.

GREENER, BUT PRICIER, TECHNOLOGY

Sturgeon has more fancy pots and pans than traditional bitumen upgraders, which has likely contributed to its high price tag.

The upgrader uses an LC Finer, similar to Shell's Scotford Upgrader, using hydrogen-addition (hydroconversion) instead of cokers to upgrade the bitumen, producing a higher yield and avoiding the formation of coke material.

The facility also includes a gasifier, burning heavy by-products to offset natural gas consumption. Gasifiers were popular concept when natural gas prices were hovering near $15/GJ, but economically questionable at gas prices less than $2.

Sturgeon includes a carbon capture and sequestration plant (CCS), where CO₂ product is shipped to old oil fields for enhanced oil recovery via the Alberta Carbon Trunk Line. According to operator NW Refining, the CCS facility will have the capacity to sequester 1.2 million t/CO₂ annually, reducing the carbon intensity of its diesel product by about 30%. Although the company did not provide a breakdown of capital costs, Shell's similarly size Quest CCS plant cost over $1 billion to build.

At almost $190,000 per flowing barrel, the facility is by far the most expensive refinery every built.

FUTURE PLANS

The original concept included plans to construct three phases, each with a bitumen processing capacity of 50,000 bbl/day. Premier Rachel Notley, former head of Alberta's opposition party, was against the project at the time, calling it a bad deal for taxpayers. The NDP government is unlikely to enter into a similar deal for the other two phases. However, Notley says she strongly supports the idea of upgrading and refining more bitumen in-house, rather than exporting heavy crude.

This week's first gallon of diesel was produced from synthetic crude oil feedstock (bitumen that has already been upgraded). The company says several more units still need to be commissioned before the refinery is fully operational.

Full commercial operation of Phase 1 is expected sometime in the first half of next year.

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