Sturgeon Refinery now refining Alberta bitumen

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WATCH ABOVE: The Sturgeon Refinery began producing diesel from synthetic oil in late 2017, but problems with a gasifier unit on site delayed the switch to bitumen. Provincial affairs reporter Tom Vernon has this update – May 20, 2020

After years of construction delays and cost overruns, the North West Redwater Sturgeon Refinery has achieved a major milestone.

“In April, we made that feedstock switch from synthetic oil to bitumen,” said Vanessa Goodman, the manager of external relations with North West Refining.

Due to the COVID-19 pandemic, a celebration of the milestone was limited to a YouTube video from North West Refining president Ian MacGregor, who has been working on this idea since 2004.

“It’s been very difficult to get it running right, and one thing there hasn’t been a shortage of is critics,” MacGregor said in the video.

“When you’re going through hell, keep going, and we know we can.”

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Ground broke on the site in 2013, with a cost estimate of just under $6 billion. The final price tag now sits closer to $10 billion.

The refinery began producing diesel from synthetic oil in late 2017, but problems with a gasifier unit on site delayed the switch to bitumen.

READ MORE: Alberta refinery hits milestone with 1st diesel production

Now that the switch has been made, the deal struck with the Alberta government under the Ed Stelmach administration will soon take effect.

The province will be the main customer, providing the facility with bitumen it receives in lieu of royalties.

The government will pay an estimated $26 billion in tolls to the refinery over the next three decades to refine that bitumen into diesel.

READ MORE: Sturgeon Refinery facing more delays after tests, won’t process bitumen until early 2020

The hope is the market for that fuel will provide enough profit to cover the cost of construction, and provide a return to the province.

“It’s definitely going to provide the benefit that we had always intended for the province,” said Goodman.

“Diesel is the kind of product that the demand is sustained for things like agriculture, for transportation of goods and services, the types of things we know we’ll always need.”

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Still, concerns remain.

“It’s a step in the right direction,” said Brian Livingston, an executive fellow with the School of Public Policy in Calgary.

In 2018, Livingston released a report that questioned the profitability of the refinery, and he says even with it now being operational, there are still risks.

READ MORE: Report finds Alberta’s North West Redwater Sturgeon Refinery’s prospects of making money are bleak

“They’ll have to pay all of the costs, operating costs, interest costs and every other cost, and they will have to start repaying the debt, which starts as early as 2022.”

The UCP government has also raised concerns about the delays and cost overruns. Premier Jason Kenney says a working group that includes members from the government and refinery are looking over the project.

“To assess the financial and operational status of the upgrader, and its prospects for the future,” Kenney said.

North West Refining is a 50 per cent owner of the facility. Canadian Natural Upgrading Limited — a subsidiary of Canadian Natural Resources Limited — also owns 50 per cent of the partnership.

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