A partnership that plans to build an oilsands refinery northeast of
Edmonton says the cost of the project has risen $8.5 billion.
North West Redwater Partnership also said in a news release Wednesday that the startup date for its bitumen upgrader has been pushed back to September 2017 from mid-2016.
When the project was approved in November 2012, the cost was estimated at $5.7 billion.
The partnership, made up of North West Upgrading Inc. and Canadian Natural Upgrading Limited, a wholly owned subsidiary of Canadian Natural Resources Limited (TSX:CNQ), said the higher cost is "due to a combination of cost inflation and the inability to fully capture certain cost savings initiatives."
It also says that it believes the merits of the project are still positive.
The refinery is expected to 50,000 barrels per day of raw bitumen supplied by Canadian Natural and the Alberta Petroleum and Marketing Commission.
"The toll payers believe, that upon successful completion of the project, this refinery will strengthen their organizations through providing a competitive return on investment and by adding 50,000 barrels per day of bitumen conversion capacity in Alberta which will help improve pricing and reduce pricing volatility on all Western Canadian heavy crude oil that they produce or are entitled to market through royalties," the press release said.
"This project will provide a local market for Alberta oilsands production that is not reliant on export pipelines, and a low carbon solution that will ensure that the CO2 footprint of the products produced by the refinery will be among the lowest in the world."
David Black said he plans to approach the federal government in the spring and ask it to guarantee about one third of the total financing it needs for a new facility near Kitimat B.C.
That doesn't involve Ottawa putting up the money, but a federal guarantee would enable Black's company, Kitimat Clean Ltd., to secure loans at a lower cost.
Black told reporters on the sidelines of a Calgary energy conference there's no reason to expect the feds to say no.
"There's a precedent in Canada for the federal government to do that when it's of vital importance to the country. They've done it many times," he said.
For example, Ottawa made a $1-billion loan guarantee for the $7.7-billion Muskrat Falls hydroelectric project in Labrador.
Investors want Canada's buy-inKitimat Clean's Chinese backers initially agreed to provide all of the financing, but later said they would be willing to put up only 70 per cent because they want to see Canada have more "skin in the game."
"I must say, I understand that. All the banks I've ever borrowed from wanted that," Black said.
A memorandum of understanding between Chinese bank ICBC and Kitimat Clean covers the financing and agreements to buy the refined product.
Black's proposal is meant to address one of the biggest concerns with Enbridge Inc.'s Northern Gateway pipeline: tankers filled with raw bitumen travelling through northern B.C. waters.
If the bitumen is refined into products such as gasoline and diesel at Kitimat before being sent overseas to China, the environmental impacts would be much less severe in the event of a spill, Black said.
Black, who doesn't believe Enbridge's controversial $6-billion proposal will be approved as-is, admits oilsands producers have not warmed to his idea, as they want the option of selling their raw bitumen abroad.
But he thinks his proposal will win support amongst British Columbians because it would address the tanker issue and the refinery would have a small environmental footprint.
The $18-billion refinery would use a technology pioneered by Calgary-based Expander Energy that would cut carbon dioxide emissions to half that of a traditional refinery. It would also produce absolutely no petroleum coke, a byproduct of heavy-oil processing that Black calls "gruesome."
"The benefit is so great that it almost neutralizes the extra CO2 given off in the oilsands production process."
The remainder of the $26-billion price tag covers a $6-billion pipeline from Alberta to Kitimat, a tanker fleet and a natural gas pipeline to supply the refinery.
Source- The Canadian Press