Media tycoon David Black proposes $13B refinery for Northern Gateway oil

[Azure]

Media mogul David Black is proposing a $13-billion oil refinery for Kitimat, British Columbia, to process oil from the controversial Northern Gateway pipeline.

Black acknowledges he doesn’t yet have investors and hasn’t had buy-in from Enbridge, First Nations or the provincial government.

Black, owner of Black Press Ltd, said on Friday that the plant would process up to 550,000 barrels a day of crude at a site near Kitimat, the terminus of the proposed Northern Gateway line.


He plans to pay for the environmental assessment, but says he wants investors to come together to pay for the refinery.

http://business.financialpost.com/20...n-gateway-oil/

$13 billion is a lot of money to put together. Obviously we would all want more of the process to stay in Canada, but is this really doable?

Would be one hell of a boost to the BC economy.

[SebC]

Will Alberta get it's "fair share" of the refinery profits?

If BC were to pass a law banning bitumen shipments on the West Coast but allow refined products, and such a law would stand up to possible legal challenges including from our free trade partners, then the refinery would likely be quite lucrative.

[GP_Matt]

Someone may correct me but I was of the impression that refined product was far more harmful to the ocean than raw bitumin. Something about the raw stuff breaking down much faster.

[Wormius]

Originally Posted by Azure

http://business.financialpost.com/20...n-gateway-oil/

$13 billion is a lot of money to put together. Obviously we would all want more of the process to stay in Canada, but is this really doable?

Would be one hell of a boost to the BC economy.

Just wondering what happens with this refinery if/when oil prices become too low to justify extracting it from the oil sands.

[Hemi-Cuda]

Originally Posted by Wormius

Just wondering what happens with this refinery if/when oil prices become too low to justify extracting it from the oil sands.

how is that ever going to happen? all of the easily accessible oil reserves have been pretty much tapped out, and oil demand is only going to skyrocket with China and India growing faster. as long as there are no other alternative energy sources that can compete with oil, the price will only increase

[Flames in 07]

Here's how this works. If the refinery is to replace an export dock, it achieves exactly what the BC primer was trying to do, only for his own jeans not the public cofers. If that crude can get on a boat, it will sell for 10-20 dollars per bbl more because they will achieve brent based price in asia or the US west coast. If it stays in BC, it will achieve Edmonton based, WTI with a big discount pricing like crude does today. So instead of the BC public being the beneficiary like the premier wanted, it will be this single ###### who will get the value.

Essentially, the cheapest crude on earth is in Alberta. Alberta producers are trying to reach new markets as its stranded right now in Ontario, Illinois etc. All this guy is trying to do is continue to strand it on shore, solely for his benefit.

[jar_e]

At the face, seems like a smart idea. Though I take it this is still purely meant for export? Cause no point to send it to Kitimat, refine it, then try to put it back into the Canadian market. Seems out of the way to do it.

In the cool story bro part...growing up in Terrace, its quite amazing to see the super-port being made and taking off in Prince Rupert and now this pipeline proposition to Kitimat. Definitely putting a lot of money and optimism into a part of Northwest BC that has been absolutely destroyed in the economy with mills and such shutting down.

[Sluggo]

Propose is the key word he is not backing what he is saying with his own money he is looking for suckers oh wait investors.

[Flames in 07]

Originally Posted by Sluggo

Propose is the key word he is not backing what he is saying with his own money he is looking for suckers oh wait investors.

Sucker?

If this replaces an export facility I'll put every penny I have and can borrow into this. Its a goldmine that hijacks Cdn crude from the open market.

[burn_this_city]

Originally Posted by Flames in 07

Sucker?

If this replaces an export facility I'll put every penny I have and can borrow into this. Its a goldmine that hijacks Cdn crude from the open market.

You would never see a decent return on your investment. $13B wouldn't build a 550kbpd refinery. This entire story reeks of a publicity stunt.

[Displaced Flames fan]

Kitimat is such a pretty little town. I imagine there would be a lot of public opposition from the locals. Terrace isn't too far off though, and that's where you might find a lot of support due to the jobs that might be created.

[Flames in 07]

Originally Posted by burn_this_city

You would never see a decent return on your investment. $13B wouldn't build a 550kbpd refinery. This entire story reeks of a publicity stunt.

yea you would, on the crude alone you'll get a ~$15 (its actually about $25 today, which is the diff in value of crude in Edm vs the real world) per bbl discount on your crude. 550kbpd means you make more than 8mil a day just on the crude discount you get. And that ignores the margin for cracking.

Your right it's a bit of a publicity stunt, but its this guys long shot in the dark to hijack Alberta's potential ability to get it's product out to an open market.

[burn_this_city]

Originally Posted by Flames in 07

yea you would, on the crude alone you'll get a ~$15 (its actually about $25 today, which is the diff in value of crude in Edm vs the real world) per bbl discount on your crude. 550kbpd means you make more than 8mil a day just on the crude discount you get. And that ignores the margin for cracking.

Your right it's a bit of a publicity stunt, but its this guys long shot in the dark to hijack Alberta's potential ability to get it's product out to an open market.

What about operating costs, turnaround costs ect? There's a reason a lot of refineries have been shuttered or sold in recent years. It's not a very good money maker when you think about return on investment.

[Fozzie_DeBear]

I've heard that Dilbit (Diluted Bitumen) is a nasty product to clean up (e.g. the Kalamazoo spill) and there isn't a lot of experience with it.

Why not build the refinery in Alberta? Then we can ship refined product west...not sure what impact it'll have on the eastern refineries.

I just don't get why Alberta is seemingly ok with letting other regions (BC, China, US, Eastern Canada) get the gains from upgrading our resources...

Probably because for any one company the cost of building a refinery >>>> than shipping it elsewhere to refine. So the Alberta government would need to tweak the economics of the project to make it worthwhile.

And, would the Northern Gateway pipeline have less opposition if it wasn't shipping Dilbit?

[Flames in 07]

Originally Posted by burn_this_city

What about operating costs, turnaround costs ect? There's a reason a lot of refineries have been shuttered or sold in recent years. It's not a very good money maker when you think about return on investment.

The crack (difference in price of crude and associated products) covers that.

Yes I know that many refineries have been sold or closed in North America. However Kitimat would be the best location, I believe, on the entire planet for a refinery. You get to buy stranded Alberta crude and sell the products into Asia, where they have to buy Brent or Dubai priced crudes to refine.

Refineries are closing right now because of flattened demand in North America, and because of how old they are. Many that have closed, have done so because they had large ... call them 'renovations' required to continue normal operation. What is replacing them is large scale refineries in India, China and even Louisiana. So the demand for refining still exists, just that new ones, in advantaged locations are replacing old ones in crappy locations.

[SebC]

Originally Posted by Fozzie_DeBear

I've heard that Dilbit (Diluted Bitumen) is a nasty product to clean up (e.g. the Kalamazoo spill) and there isn't a lot of experience with it.

Why not build the refinery in Alberta? Then we can ship refined product west...not sure what impact it'll have on the eastern refineries.

I just don't get why Alberta is seemingly ok with letting other regions (BC, China, US, Eastern Canada) get the gains from upgrading our resources...

Probably because for any one company the cost of building a refinery >>>> than shipping it elsewhere to refine. So the Alberta government would need to tweak the economics of the project to make it worthwhile.

And, would the Northern Gateway pipeline have less opposition if it wasn't shipping Dilbit?

Refined products. A refinery doesn't make one product, it makes a wide variety of products. That's fine if you're on a coast, as the products will be travelling by ship. If the refinery is inland, then instead of building one pipeline to the coast you'd have to build several, or ship via truck/train. And yeah, building a refinery here just isn't economically worthwhile vs. increasing our extraction output. The government could subsidize one, but subsidies create deadweight losses (and could contravene our free trade agreements) so that's not worth doing either.

[Flames in 07]

Originally Posted by SebC

Refined products. A refinery doesn't make one product, it makes a wide variety of products. That's fine if you're on a coast, as the products will be travelling by ship. If the refinery is inland, then instead of building one pipeline to the coast you'd have to build several, or ship via truck/train. And yeah, building a refinery here just isn't economically worthwhile vs. increasing our extraction output. The government could subsidize one, but subsidies create deadweight losses (and could contravene our free trade agreements) so that's not worth doing either.

You can batch products in a single line. It happens all the time. In fact there are lines that batch products and crude.

[Frequitude]

Originally Posted by Flames in 07

yea you would, on the crude alone you'll get a ~$15 (its actually about $25 today, which is the diff in value of crude in Edm vs the real world) per bbl discount on your crude. 550kbpd means you make more than 8mil a day just on the crude discount you get. And that ignores the margin for cracking.

Your right it's a bit of a publicity stunt, but its this guys long shot in the dark to hijack Alberta's potential ability to get it's product out to an open market.

Huh? How would a refinery monetize the WTI-Brent differential? They don't produce crude, they consume it. The pipeline exploits that arb, not the refinery. As soon as that barrel hits tidewater it's priced on a Brent basis. That would increase the refinery's crude costs by $20 relative to Albeta refineries.

[SebC]

Originally Posted by Frequitude

Huh? How would a refinery monetize the WTI-Brent differential? They don't produce crude, they consume it. The pipeline exploits that arb, not the refinery. As soon as that barrel hits tidewater it's priced on a Brent basis. That would increase the refinery's crude costs by $20 relative to Albeta refineries.

Not if BC bans bitumen shipments.

[Frequitude]

Originally Posted by SebC

Not if BC bans bitumen shipments.

At least that would save Voyageur from being a dog...