The Alberta government has successfully negotiated contracts for two projects that will advance the upgrading and refining of oil sands bitumen to diesel fuel. The first project, with the North West Upgrading (NWU) / Canadian Natural Resources Limited (CNRL) Partnership will lead to construction of a new bitumen refinery as part of the government’s bitumen royalty-in-kind (BRIK) initiative. NWU and Canadian Natural will each own 50% of the partnership, with NWU acting as the operator.
For the second project, the Alberta government and Enhance Energy Inc. have agreed to terms and conditions specific to the first major carbon capture and storage (CCS) project in the province. Enhance will build the Alberta Carbon Trunk Line (ACTL), a pipeline which will deliver carbon dioxide (CO2) captured from the refinery, to be used for enhanced oil recovery from existing conventional oil fields.
This new refinery and CO2 pipeline will significantly advance Alberta’s capacity for refining bitumen into value-added products and increase recoveries from Alberta’s conventional oil reserves. These projects underline Alberta’s commitment to responsible, cleaner energy production.
—Premier Ed Stelmach
Construction of Phase One of the bitumen refinery is targeted for completion in mid-2014. It will process for market 37,500 barrels daily of Crown bitumen in addition to 12,500 barrels per day of bitumen from Canadian Natural Resources Limited (CNRL). The refinery will process the Crown’s bitumen for a processing fee which will result in the Crown receiving higher revenues created by the higher-priced refined bitumen products.
During this first stage, the refinery will produce more than 5.5 million liters/day (1.45 million gallons US) of ultra-low sulfur diesel while capturing over three thousand tonnes of CO2 daily. Enhance Energy will then transport the CO2 via the 240-km (149 miles) ACTL pipeline to conventional oil recovery projects throughout central Alberta where it will be injected into oil reservoirs for enhanced oil recovery.
Alberta’s Carbon Capture and Storage Development Council estimated in 2009 that sufficient enhanced oil recovery capacity exists in Alberta to potentially store 450 megatonnes of CO2 and produce an additional 1.4-billion barrels of oil from conventional reservoirs throughout the province, potentially generating up to $25 billion in additional provincial royalties and taxes. Approximately 18% of conventional reserves in place are recovered using current technology. Injecting solvents, such as CO2 into the reservoirs can increase total recovery rates to 26%.
The Government of Alberta announced its intention in 2008 to collect oil sands bitumen royalty volumes in-kind to encourage upgrading, refining and petrochemical development in Alberta. A Request for Proposals to purchase or process 75,000 barrels per day of Crown owned bitumen was issued in July 2009 and negotiations began with the partnership in May 2010. As the steward of the resource for Albertans, the Alberta government is entitled to take its royalty share of bitumen production in-kind, as it currently does for conventional oil production.
The Alberta government has committed $2 billion to reduce greenhouse gas (GHG) emissions through carbon capture and storage. Four projects, including the ACTL supported through Alberta’s CCS program are expected to reduce GHG emissions by five-million tonnes per year beginning in 2015.