Upgraders not welcome
Posted by mhudema on June 18, 2008
Oil sands upgrader processing strategy under fire
CALGARY — A report cautioning against the construction of more upgraders in Alberta is reopening the question of how best to process Alberta’s hard-to-handle bitumen once it’s extracted from the oil sands.
Crude from Alberta’s oil sands is too heavy for most refineries to process, and can’t travel down a pipeline without being diluted with a lighter petroleum product. Alberta argues the best way to get the bitumen to market is by processing it in an upgrader – a vast industrial complex that removes the heavier parts – allowing output to be received by more refineries and ensuring that valuable processing work stays in the province.
However, the study, released yesterday by the environmental group, Pembina Institute, questions the pace of development near Edmonton, where nine upgraders – representing billions of dollars of investment – are expected to start up between 2015 and 2020. The report says the facilities combined will consume 10 times as much water as Edmonton, and calls for a pause in granting approvals to new projects.
“The Alberta government has the opportunity to avoid environmental and social problems now being experienced in the Fort McMurray area,” said Mary Griffiths, the lead author of the report. “Through pro-active planning, those mistakes can be avoided.”
Instead of building upgraders, companies can add diluent to their bitumen so it can run down a pipeline to a refinery. Refiners in the U.S., especially on the Gulf Coast, are keen to obtain more Canadian supplies, but this would take processing out of Alberta.
Alberta Energy rejected Pembina’s call for a pause. Spokesman Jason Chance said any delay would damage business confidence in Alberta, resulting in fewer upgraders being built in the province. “We feel we can strike the right balance between protecting the environment while retaining Alberta’s economic advantage.”
There’s a deep split among oil sands producers over whether to upgrade or not. Companies such as Canadian Natural Resources Ltd., Royal Dutch Shell PLC, Petro-Canada and Suncor Energy Inc. are all building or plan to build new oil sands developments that contain upgraders, despite the vast expense involved.
Others, including EnCana Corp. and Husky Energy Inc., have struck deals with refiners in the U.S. to adapt plants to take more heavy crude.