A controversial refinery north of Edmonton has reached an important milestone. The Sturgeon Refinery is now producing diesel.
Two units in Phase 1 of the refinery are still under construction. That means it still cannot refine raw bitumen into diesel but it is converting synthetic crude into fuel.
CEO Ian MacGregor says the milestone means a lot. He likens refinery production with the last spike in the Canadian Pacific Railroad.
“I feel like, you see the picture of Van Horne and the little kid in the back there and this is the closest an engineer can get to feeling like that.”
The Sturgeon project is the first new refinery in Canada since 1984. When complete, Phase 1 will produce 50,000 barrels per day of diesel.
The project has had problems along the way. The completion date has been pushed back. Project costs have ballooned. They jumped from an estimated $6.5 billion in 2011 to $9.3 billion. Former provincial finance minister, Ted Morton criticized provincial involvement.
MacGregor maintains the economics behind the refinery are sound.
“Everyone focuses on how much they cost today. If you think of the channel between Britain and France, in the day, it was more expensive than they thought it would be. No one remembers that now.
“There’s hundreds of problems a day these guys are solving. We’ll work through them and it’ll work in the end.
“Then, 50 years from now, people will never remember anything but how much money and how much diesel comes out of it,” MacGregor said.
MacGregor says the refinery’s real value is not what comes out of it; but what goes in. It will eventually be a place to locally sell Alberta bitumen.
The provincial government also has a stake in the refinery. It can collect royalties from oilsands producers in bitumen instead of money. The province has agreed to refine a portion of that bitumen at the Sturgeon Refinery. There is risk to the province but area MLAs say the risk is manageable.
“This is going to be a real benefit for Albertans going forward. I think we’ll be making our money back and more,” said Athabasca-Sturgeon-Redwater MLA, Colin Piquette.
Piquette adds the project has helped create jobs in the area. Thirty-six-thousand people have worked on building Phase 1 of the refinery. They collectively worked 40 million hours.
Company officials want to soon expand the refinery and build Phase 2 and Phase 3. Each addition would increase output by 50,000 barrels per day of diesel.
As enthused as the province is with the project, so far it isn’t promising any more royalty commitments to backstop phases two and three.
“Officially, until Phase 1 has demonstrated its viability and it’s up and running, there’d be no official discussions on that,” Piquette said. “They’re open to talking but it’s a bit premature at this stage.”
The refinery will use carbon capture technology, capturing 1.2 million tonnes of CO2 per year, then move it down a pipeline for enhanced oil recovery in central Alberta.