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

[Frequitude]

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.

Agreed. Doubt $13B even gets you 200 kbpd. There's a reason we haven't seen a new NA refinery in, what, 35 years?

[Flames in 07]

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.

Im saying if that refinery REPLACES the ability to export the crude, the refinery gets to monitize the spread. Buy cheap Ab crude, sell products into markets that are forced to buy Brent/Dubai based crude.

[Flames in 07]

Originally Posted by Frequitude

Agreed. Doubt $13B even gets you 200 kbpd. There's a reason we haven't seen a new NA refinery in, what, 35 years?

There was a new one built this year. And a few in the last 35 years.

Edit: I just googled the new one this year, 10B bought them 600kbpd of capacity.

[Frequitude]

Originally Posted by Flames in 07

Im saying if that refinery REPLACES the ability to export the crude, the refinery gets to monitize the spread. Buy cheap Ab crude, sell products into markets that are forced to buy Brent/Dubai based crude.

Products already get Brent pricing. There's craploads f NA refineries on tidewater. They're all buying cheap WTI and selling high priced products. This would be nothing new.

Originally Posted by Flames in 07

There was a new one built this year. And a few in the last 35 years.

Edit: I just googled the new one this year, 10B bought them 600kbpd of capacity.

Where?

[Flames in 07]

Originally Posted by Frequitude

Products already get Brent pricing. There's craploads f NA refineries on tidewater. They're all buying cheap WTI and selling high priced products. This would be nothing new.

Some products are, but not crap loads buying exclusively cheap Edm heavy and sell all its products at brent based prices. Some refineries can do this on a small part of their capacity, but I'm not sure any of them would be positioned the way someone in Kitimat would be.

What this refinery does (again assuming it REPLACES the ability to export) is jack the producers, keep them from getting to open markets and allowing the crude to clear at true market levels.

I could be wrong, but I bet you can't name a single refinery that gets half or more (never mind ALL) its crude at the price Kitimat would and then get to sell half or more it's products into brent based pricing markets.

Originally Posted by Frequitude

Where?

http://www.reuters.com/article/2012/...84U13J20120531

[burn_this_city]

Originally Posted by Flames in 07

There was a new one built this year. And a few in the last 35 years.

Edit: I just googled the new one this year, 10B bought them 600kbpd of capacity.

That was an expansion of an existing refinery, and $10B probably got them 2-300kbpd more. Plus money goes much further in the gulf coast than it does in Canada, due to labour costs, and labour productivity. Kitimat is a crappy place to build a refinery compared to Texas. The reason we aren't building many upgraders or refineries is the poor return on investment in Canada, and the extreme competition for labour and materials.

[Flames in 07]

Originally Posted by burn_this_city

That was an expansion of an existing refinery, and $10B probably got them 2-300kbpd more. Plus money goes much further in the gulf coast than it does in Canada, due to labour costs, and labour productivity. Kitimat is a crappy place to build a refinery compared to Texas.

It's a whole new train, so the fact that its an expansion isn't really going to save money, except to the extent they already had the land ... which I imagine isn't a significant cost, especially in Kitimat.

I've never been part of building a refinery. However I suspect the logistics probably are tougher in N BC, but not THAT much more. You need to bring in hardware, from outside countries by vessel. Kitimat is going to receive that hardware the same way you would in the Gulf, via some dock. However I do agree aggregating the labour will definitely be more expensive and challenging.

I do see the expansion is only 300kb/d, not 600. So good point that it's only half of what I said. However nobody in that group is exactly known for controlling costs very well .

Anyway my point still stands that if someone put a refinery there, its a clever way of jacking Alberta crude producers in the same way, but on a much bigger scale that the BC premier is trying to do.

[Frequitude]

Really man, a brownfield expansion is vastly different than a green field new build. Refineries are ridiculously expensive to build. Just look at Voyageur in FMM. That's a 250kbpd upgrader and it's coming in over $10B (burn_this_city..where's it at? Been a while since I was in Major Projects). And an upgrades is just a really simple refinery. Add in cat crackers, HF units, etc and we're talking a ridiculously uneconomic sum of money. There is no way this thing gets built.

[Flames in 07]

Originally Posted by Frequitude

Really man, a brownfield expansion is vastly different than a green field new build. Refineries are ridiculously expensive to build. Just look at Voyageur in FMM. That's a 250kbpd upgrader and it's coming in over $10B (burn_this_city..where's it at? Been a while since I was in Major Projects). And an upgrades is just a really simple refinery. Add in cat crackers, HF units, etc and we're talking a ridiculously uneconomic sum of money. There is no way this thing gets built.

Massive large scale refineries are being built all around the world. They are choking off all these old simple ones. I don't know exactly what it would cost, but I do know it would generate margins that are astronomical compared to a typical refinery. Completely at the expense of Alberta producers.

[burn_this_city]

Originally Posted by Frequitude

Really man, a brownfield expansion is vastly different than a green field new build. Refineries are ridiculously expensive to build. Just look at Voyageur in FMM. That's a 250kbpd upgrader and it's coming in over $10B (burn_this_city..where's it at? Been a while since I was in Major Projects). And an upgrades is just a really simple refinery. Add in cat crackers, HF units, etc and we're talking a ridiculously uneconomic sum of money. There is no way this thing gets built.

Last I heard its north of $12B, but I work for a different owner company now.

[Frequitude]

Originally Posted by Flames in 07

Massive large scale refineries are being built all around the world. They are choking off all these old simple ones. I don't know exactly what it would cost, but I do know it would generate margins that are astronomical compared to a typical refinery. Completely at the expense of Alberta producers.

No dude, it wouldn't. As SebC says only if BC were to ban bitumen shipments otherwise that AB discount disappears as soon as the pipeline opens. And even then it wouldnt make your crazy returns for long. Keystone XL, Seaway, line 9 and more are all going to chip away at this spread. You don't build a multi-decade multi-billion project on a short term arb.

Enough going back and forth endlessly though. Hit me up on PM if you want to banter further.

[burn_this_city]

Scratch that, apparently Voyageur will cost more than $20B, which I thought was the original combined costs of FB3-6 and the Upgrader.

http://o.canada.com/2012/07/25/sunco...-concerns-ceo/

[Flames in 07]

Originally Posted by frequitude

no dude, it wouldn't. As sebc says only if bc were to ban bitumen shipments otherwise that ab discount disappears as soon as the pipeline opens. And even then it wouldnt make your crazy returns for long. Keystone xl, seaway, line 9 and more are all going to chip away at this spread. You don't build a multi-decade multi-billion project on a short term arb.

Enough going back and forth endlessly though. Hit me up on pm if you want to banter further.

ok

[Muta]

They should spend $13 billion on a nuclear fusion reactor... that'll be better and more sustainable long-term. If that technology doesn't exist, build $13 billion worth of solar plants in the sunniest province in Canada (Alberta).

Go earth!

[Knalus]

Originally Posted by Frequitude

No dude, it wouldn't. As SebC says only if BC were to ban bitumen shipments otherwise that AB discount disappears as soon as the pipeline opens. And even then it wouldnt make your crazy returns for long. Keystone XL, Seaway, line 9 and more are all going to chip away at this spread. You don't build a multi-decade multi-billion project on a short term arb.

Enough going back and forth endlessly though. Hit me up on PM if you want to banter further.

That's too bad, I was enjoying this.

[Rutuu]

Originally Posted by Knalus

That's too bad, I was enjoying this.

Same here.

I work Australian O&G now, but I'm always a Canadian at heart, so hearing about how Alberta is going to get it's stranded petroleum and NG to market is interesting.

[taffeyb]

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.

This needs to be a partnership. Remember, it's likely that Keystone will get built...TransCanada may be able to convert one of their under utilized gas pipelines to crude and ship East. If BC builds a refinery, they will need to pay a fair price...Also, don't assume that all products shipped out of Kitimak needs to be refined...

[Azure]

Plus, would a refinery even get built with Alberta producer money? So I would think there would be a partnership too.

[Rerun]

If the proposed oil refinery in Kitimat is built, it could end up forcing the province to jettison its long-term environmental goals, opponents say.
“Building the refinery would have very large implications for B.C.’s green commitment,” said Jennifer Grant, director of the oilsands program at Alberta’s Pembina Institute.
“B.C. could potentially have to give up its green targets because [constructing the facility is] an intensive project with huge carbon footprints.”

Read more: http://www.vancouversun.com/news/Kitimat+refinery+could+blacken+province+reputation +foes/7109095/story.html#ixzz241y7Q54O


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[TurnedTheCorner]

I'm not understanding the repeated "...at the expense of Alberta..." comments. Crude is crude, and is sold at the market rate regardless of where the refinery is. Why would a BC refinery make this more of an issue? Or am I misunderstanding the remark?