February 19, 2013

Turning Bitumen into Diesel

Strathcona County watched in dismay as the plans for half-a- dozen upgraders disappeared with the 2008-09 global meltdown, recalls Mayor Linda Osinchuk.

But these days, there’s some optimism that at least two of the projects are possible — reviving the mothballed Heartland, also called the B.A. upgrader, already partially built by Calgary-based Value Creation Inc.; and the North West upgrader near Redwater that will turn bitumen into diesel.

The B.A. upgrader, owned by Value Creation Inc., could be ready in 18 months to turn 85,000 barrels of bitumen into synthetic crude that any refinery in Canada could handle, Osinchuk noted.

The North West upgrader, barely started, is just five years away.

That short time frame is very attractive to oilsands producers currently facing a lack of pipeline capacity to ship the stickier bitumen that can go to only a handful of U.S. refineries on the Gulf coast.

“The fastest, soonest solution is the B.A. upgrader,” said Osinchuk. “We support pipelines, of course, but you don’t want to put all your eggs in one basket. The fastest, soonest solution is the B.A. upgrader.”

Osinchuk is “both frustrated and optimistic” these days. The upgrader’s future is in limbo because of a battle over expanded urban boundaries for the city of Fort McMurray, but there must be a way to find a solution, she says.

Columba Yeung, VCI founder and CEO, says the company needs access to its bitumen reserves as collateral to raise the capital to finish the upgrader. Consultations with the province are underway.

Yeung says that, having closed down the project once due to financial problems, he needs the collateral to convince investors to come back. “We don’t want to go through that again,” he says.

Osinchuk recently visited High River south of Calgary to tour VCI’s new technology project and was excited by what she saw.

Yeung, a research scientist and the engineer who built the Shell Scotford upgrader and refinery, says he has developed new technology that will partially upgrade the bitumen as it comes out of the ground under the steam-assisted gravity drainage techniques.

By removing a component called asphaltenes in the bitumen, the product comes out as a medium crude oil and can be handled by a much wider range of refineries, including those in Eastern Canada, he says.

“If we make it into medium crude, it is also a perfect replacement for Alaskan crude in California,” said Yeung, looking at new potential markets.

The bitumen bubble is caused partly by the fact only a handful of refineries on the U.S. Gulf Coast can handle the bitumen, Yeung says.

It is also costly and inefficient to ship it to the Gulf coast as one-third of pipeline product is diluent, he adds.

Osinchuk says the province needs to look at all options to keep the energy industry healthy. “It’s time to move in a bit of a different directions.”

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