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

[Fozzie_DeBear]

You make money taking any raw feedstock and adding value. You can sell a chair for more than a log. So a refinery would theoretically make more money for the region where it is located.

Trouble is comapnies don't really care which region gets the value-add...

[SebC]

Originally Posted by 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?

In order of best to worst for Alberta:

1. The refinery, the pipeline, and a dilbit export terminal get built... in this scenario the refinery must compete with the shipping terminal, refinery pays produces the Brent (higher) price.

2. Just the pipeline and the dilbit terminal get built. AB gets the Brent price.

3. The pipeline and refinery get built, but no dilbit terminal. AB gets the WTI price.

4. The pipeline doesn't get built.

The refinery would be "at the expense of Alberta" if you assume that case 1 and case 4 are out of the picture. Case 1 can probably be eliminated on the basis that it would make the refinery unviable, so we're really only assuming that the pipeline gets built.

[SebC]

Originally Posted by Fozzie_DeBear

You make money taking any raw feedstock and adding value. You can sell a chair for more than a log. So a refinery would theoretically make more money for the region where it is located.

Trouble is comapnies don't really care which region gets the value-add...

If BC gets a refinery it's good news for Alberta, unless it does so at the expense of a dilbit export terminal. If it does, that won't be because companies don't care about us (not that they do), it's because the BC government is screwing us. (See my post above for explanation - Case 3 would most likely because caused by BC approving the pipeline but banning raw dilbit shipping in the gulf.)

[TurnedTheCorner]

But dilbit is all that is getting produced for the most part, right? Some projects have upgraders planned, but isn't most of what's getting produced simply bitumen anyway? That's what I think is confusing me. Regardless of whether there's termnals in BC or not, or an additional refinery in BC, or not, isn't it mostly bitumen that is getting sold from the oilsands? At whatever the market rate is for bitumen?

Thanks for the explanations.

[SebC]

Originally Posted by TurnedTheCorner

But dilbit is all that is getting produced for the most part, right? Some projects have upgraders planned, but isn't most of what's getting produced simply bitumen anyway? That's what I think is confusing me. Regardless of whether there's termnals in BC or not, or an additional refinery in BC, or not, isn't it mostly bitumen that is getting sold from the oilsands? At whatever the market rate is for bitumen?

Thanks for the explanations.

It's mostly bitumen, but the market rate is geographically dependent. There's a supply glut in North America that is depressing our prices (WTI) compared to the rest of the world (Brent). That's why the pipeline is so important. Production in Alberta would not have to go up at all for it to have a big impact on our economy.

[TurnedTheCorner]

Yeah, I know there has been the spread between Brent and WTI for a while, and it's expected to last for years. But neither is being produced in the oilsands. So...? Isn't bitumen being bought from Alberta producers, regardless of whether it's being moved to Ontario, or moved to Henry Hub, or moved to an NA refinery, or moved to a terminal, or...

Sorry, I'll stop now. I just don't seem to be able connect the dots.

[SebC]

Originally Posted by TurnedTheCorner

Yeah, I know there has been the spread between Brent and WTI for a while, and it's expected to last for years. But neither is being produced in the oilsands. So...? Isn't bitumen being bought from Alberta producers, regardless of whether it's being moved to Ontario, or moved to Henry Hub, or moved to an NA refinery, or moved to a terminal, or...

Sorry, I'll stop now. I just don't seem to be able connect the dots.

Nah, keep going until you get it. We will find your missing dot! Bitumen is worth more where crude is worth more, assuming a consistent cost of upgrading.

[TurnedTheCorner]

Ah, OK - that helps a lot actually. The spread for bitumen feed in the two marketplaces is similar to the spread for refined/light oil in the two marketplaces.

Thank you.

[Azure]

I'm glad someone else asked so I didn't have too.

[rubecube]

Bumping this because I'm surprised there hasn't been much discussion about it lately. It really sounds like the proposal is losing more traction than it's gaining in BC. Enbridge has done a really lousy PR job of selling this to British Columbians and I think there's a really good chance it falls through.

[Azure]

What does Enbridge have to do with the proposal to build a refinery in BC?

[Reaper]

Originally Posted by Azure

What does Enbridge have to do with the proposal to build a refinery in BC?

Nothing. He's just confusing the issue.

[rubecube]

Yeah, sorry, I'm talking about the pipeline. Guess I could've created a different thread.