CALGARY – The chairman of North West Upgrading Inc. says a government-backed bitumen refinery being built near Edmonton can still turn a tidy profit, despite a major cost overrun and delay.
Ian MacGregor says he was surprised and disappointed when he learned the pricetag of the refinery — part of a partnership with oil giant Canadian Natural Resources Ltd. (TSX:CNQ) — would be 50 per cent higher than the original estimate of $8.5 billion.
But MacGregor says companies can make a $45-per-barrel margin, from converting oilsands bitumen into high-value diesel — way up from just $6 in 2010.
He says Western Canada is perennially low on diesel, so the product is in high demand.
Some of the refinery’s feedstock will come from the Alberta government, which collects some of its oilsands royalties in bitumen rather than cash as part of a program to boost to province’s refining industry.
Alberta Energy Minister Ken Hughes says the project remains a good deal for taxpayers.
A close observer of Canada’s refining industry says he doesn’t see how an over-budget and delayed bitumen refinery near Edmonton makes economic sense.
Roger McKnight, with energy consulting firm En-Pro International, likens the North American refining industry to a “dinosaur” and says a tough market has caused refineries in other parts of Canada to close.
McKnight made his remarks a day after the companies building the government-backed Sturgeon facility announced a 50 per cent jump in the project’s pricetag to $8.5 billion and a one-year delay until 2017.
Canadian Natural Resources Ltd.’s (TSX:CNQ) and North West Upgrading Inc.’s 50,000-barrel-per-day Sturgeon Refinery is designed to process oilsands bitumen straight into more valuable diesel.