CALGARY - North West Upgrading Inc. and Canadian Natural Resources Ltd. have formally decided to go ahead with building a new bitumen refinery in Alberta's Industrial Heartland.
The $5.7-billion first phase of the Sturgeon Refinery, which will turn oilsands crude into higher-value products such as diesel and capture carbon dioxide for reuse in the energy sector, is expected take three years to build.
Above-ground construction on Phase 1 is slated to begin in the spring. The refinery's capacity will initially be 50,000 barrels per day but may eventually be tripled to 150,000 barrels per day.
"A lot of time and effort has been spent during the last eight years to get us here," said the partnership's president, Doug Quinn.
"It's the right time and what we are building will add significantly to the value that Alberta receives for its bitumen."
The Alberta government will supply 75 per cent of the bitumen to the refinery as part of a program to help support the province's oilsands processing industry, while Canadian Natural (TSX:CNQ) will supply the rest.
CNQ and North West each own half of the refinery project.
The facility will capture 1.2 million tonnes of carbon dioxide, which will be sold to oil companies that can use the gas to increase pressure in mature reservoirs and boost production.
"This project will demonstrate that Alberta has the lowest carbon footprint solutions for converting bitumen into diesel fuel," said Ian MacGregor, founder and chairman of North West Upgrading. "This is the first refinery in the world that incorporates CO2 capture into the initial design."
Some 8,000 people are expected to be employed during the refinery's peak construction, including at sub-suppliers and module fabrication yards.
Other oilsands producers have been looking at processing less of their raw bitumen in-province, as burgeoning supplies of light crude from areas such as the Bakken in North Dakota erode the economics of their projects.
Refineries south of the border in places like Chicago and Texas have also been configured to handle oilsands crude and an increasing number of pipelines are being built to connect that oil to those markets.
Oilsands giant Suncor Energy Inc. (TSX:SU) says the economic feasibility of the Voyageur upgrader it jointly owns with France's Total S.A. is "challenged" in the current environment. The companies are reviewing that project, and two oilsands mines, to see if they'll be profitable enough to move ahead.
Canadian Natural president and chief operating officer Steve Laut said investing to process heavy oil in Alberta is the right move for that company.
On a conference call Thursday, Laut told analysts the refinery "not only provides a reasonable return, but it will help the volatility on pricing for Canadian heavy oil."