Shell Upgrader - 100,000 bpd expansion goes online

Another upgrader in the area which has also been in the headlines is, of course, the Shell upgrader. In the below article from The Edmonton Journal, Shell announces the successful commissioning and startup of its 100,000 barrel/day expansion.

Shell Oilsands Upgrader Goes On-stream

Massive Scotford expansion dwarfed other construction projects nationwide

By Journal Business Staff, edmontonjournal.com May 4, 2011

 

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The Shell Scotford upgrader is shown northeast of Edmonton on May 29, 2010.

Photograph by: Bruce Edwards, edmontonjournal.com

EDMONTON - After five years of work and a cost of around $10 billion, Shell’s Scotford Upgrader Expansion has successfully started production.
Shell announced Wednesday the 100,000-barrels-per-day expansion, which will bring total production to 255,000 bpd, is now in commercial production following months of tests and trial runs of the plant.
“This startup is an important milestone for our heavy oil business,” said Marvin Odum, Shell Upstream Americas Director said in a statement.
“And it adds new capacity from an important source of oil in a world requiring more secure energy.”
The Scotford Upgrader processes oilsands bitumen from the Muskeg River Mine and Jackpine Mine for use in refined oil products. And with production capacity at the Athabasca Oil Sands Project (AOSP) joint-venture now at 255,000 barrels-per-day, engineers will focus on improving operating efficiencies and adding capacity through debottlenecking.
Shell said engineering for the expansion was done in offices in Edmonton, Calgary, Toronto, Houston, New Delhi and Shanghai.
At peak construction, more than 10,000 skilled trades on-site, making Scotford the largest construction project in Canada.
Apprentices made up 30 per cent of the workforce, and about 45,000 people were trained and worked on the site for periods during the construction.
The Scotford project needed 18,000 piles driven 20 metres into the ground to support the massive facility.
About 65,000 tonnes of structural concrete were poured, and 17 tanks capable of holding 270 million litres of liquid were erected.
There are five reactors in the Residue Hydro Conversion (RHC) unit, and each was 16 storeys tall, weighed 1,100 tonnes and were nine inches thick. About 16,000 metric tonnes of structural steel were used, and 546 modules were fabricated for the project.
Shell Canada Energy is the 60-per-cent owner and operator of AOSP, along with Chevron Canada Limited (20 per cent) and Marathon Oil Corporation (20 per cent). The AOSP includes the Muskeg River Mine, Jackpine Mine and Scotford Upgrader.
dcooper@edmontonjournal.com

© Copyright (c) The Edmonton Journal

NWU / CNRL Upgrader Part 4

This next article comes from the Saint City News out of St. Albert in August 2010.

From here, we fast forward to February 2011. In this press release from the Government of Alberta, the successful negotiation of the BRIK initiative with NWU / CNRL is announced.

Your Alberta Online also has an excellent video regarding the NWU upgrader and the $4 Billion commitment from the Alberta Government.

NWU / CNRL Upgrader Part 3 - Big Money Is Pouring Into The Region

We return to our featured news releases.

We left off with a press release from May 18, 2010 in which the Alberta Government was getting set to begin negotiations. Here we have an additional press release regarding the start of negotiations.

We pick up a month later - June 13, 2010 when the following article appeared on Stockhouse.

MAJOR NEW TAILWIND FOR THE CANADIAN OIL SANDS

Big money is pouring into the region

The U.S. government is set to kill offshore drilling... and hand a gift to a niche group of energy producers. For more than a month, people all over the world have watched the Deepwater Horizon debacle develop into one of the worst environmental disasters of all time. BP, the oil giant operating the rig, has tried several methods to plug the hole. Thus far, none have worked. Its next step is to drill two "relief wells" on the sides of the existing well to intercept the oil. Once the oil is intercepted, the leak will be plugged. There's a high probability the relief wells will work. By August, the leak should be contained. However, looking ahead, I see terrible times for the offshore industry. That's great news for Canada's oil sands. Let me explain... On May 27, the government suspended offshore exploratory drilling for at least six months. After that ban is lifted, costs will surge as new mandatory safety measures are implemented. Oil producers may have to drill relief wells next to existing wells, also resulting in increased costs. Offshore drillers will see huge tax hikes. Insurance for rigs will skyrocket. It may not be worth it (based on costs and politics) for Big Oil to allocate tens of millions of dollars into offshore drilling. It'll be too risky to put money to work in this space. And for this to happen in the U.S., it's especially problematic... According to the Energy Information Administration (EIA), the U.S. consumes 20% of the world's oil. It only has 2% of the world's reserves, including deposits in the Gulf of Mexico. The U.S. is the largest consumer of oil in the world, using about 6.8 billion barrels annually. Earlier this year, the EIA predicted expanded areas for U.S. offshore drilling will yield up to 63 billion barrels of oil. With the new moratorium in place, we know that drilling won't happen for a long time. That means more than nine years of U.S. oil production could be in jeopardy (63 billion barrels/6.8 billion barrels a year = 9.2 years) due to an increase in offshore regulation. To feed our appetite for oil, we must tap another source. Sure, we could import more oil from the Middle East. We can also try to increase imports from Mexico and Venezuela. However, the easiest solution is to tap reserves in Canada's oil sands. Most Americans don't know it, but Canada is already our largest supplier of foreign oil. They have monstrous deposits trapped in layers of silt and sand. Canada's oil sands region holds over 173 billion barrels of oil reserves... second in the world behind Saudi Arabia. That oil is right on our doorstep, in a country much more politically stable than our other oil suppliers (Mexico, Venezuela, Nigeria, and the Middle East). We already have pipelines in place to transport oil into the U.S. And it's cheaper to get oil from the oil sands than to get it from deepwater oil areas. But like most of the world's large oil patches, anyone interested here will have to compete with China... On May 13, a subsidiary of China Investment Corporation (CIC) gave Penn West Energy Partners $1.8 billion to develop its oil sands assets in Alberta. This followed two other major deals over the past 12 months. Sinopec and PetroChina, two of the largest oil producers in China, invested a total of $6.5 billion in Canadian companies Athabasca Oil Sands and Syncrude. So we've got a huge headwind for offshore oil... and a tailwind from China for the oil sands.

Both these trends will benefit Canada's large-cap oil producers like Suncor (NYSE: SU) and Petro-Canada (NYSE: PCZ). But as someone who analyzes smaller, more volatile, under-$10 stocks, I'm more interested in infrastructure providers. The big players need these companies to build roads, remove and process waste, and provide labor. Infrastructure firms that have been in the oil sands region for awhile and have good ties with the government are your best bets.


Disclosure: The author does not hold positions in any of the securities mentioned



Copyright 2010 Stockhouse

NWU / CNRL Upgrader Part 2

The next in our series of featured articles and news releases jumps forward to May 18, 2010. In this NWU press release, it is announced that the Government of Alberta is poised to engage NWU company executives in negotiations regarding its BRIK (bitumen royalty-in-kind) initiative. Follow this link for further reading.

This fact sheet also provides some interesting information about the upgrader.

Some of you may be wondering what this BRIK initiative is all about. Rest assured, it will be discussed in further detail in a following post.

For your further viewing pleasure, we have this video about the Oil Sands and upgraders of Alberta.

NWU / CNRL Upgrader Part 1

This project was covered briefly in a previous post as part of our "ongoing projects" initiative. However, as it is perhaps the largest and highest profile project ongoing in Redwater right now, we will devote the next few posts solely to this project and present a series of articles and videos from local news releases concerning this undertaking. The first article dates back to January 28, 2010 when the partnership between NWU and CNRL was first announced. NORTHWEST UPGRADING INC., CANADIAN NATURAL RESOURCES LIMITED ANNOUNCE AGREEMENT.


Below is the proposed schedule of activities for this project.

Fort Hills Energy Ltd Partnership

Company Overview:

The Fort Hills Energy Ltd Partnership is a joint venture between Suncor, Total Energy Services and Teck Cominco.

Project Description:

350,000 barrel per day bitumen upgrader

Status:

The project has received all necessary regulatory approvals from the Energy Resources Conservation Board and from Alberta Environment. Future construction is dependant on the outcome of a review that is currently underway at Suncor regarding the timing of their bitumen extraction and upgrading assets.

North West Redwater Partnership

This is a joint venture between North West Upgrading Inc. and Canadian Natural Resources Limited. Each company holds a 50% stake.

Company Overview:

North West Upgrading Inc is a private, Alberta-based company that was founded in 2004 by a group of Albertans who shared a vision to build a world class bitumen refining business that would allow them to maximize the value of bitumen resources in a responsible and sustainable manner.

Canadian Natural Resources Limited is one of the largest independant crude oil and natural gas producers in the world.

Project Description:

150,000 barrel per day bitumen upgrader and diesel refinery (to be completed over 3 phases)

Capital Cost:

$5 Billion for phase 1, which will produce 50,000 barrels per day

Status:

The Bitumen Royalty in Kind was signed in February, 2011 with the Alberta Government, resulting in accelerated engineering and design work. A target of late 2011 or early 2012 has been set for the sanctioning of the first phase. Currently, on-site work is minimal and includes only basic site preparation and other limited activities. This is expected to continue for the remainder of this year until the project is officially sanctioned. At that point, significant on-site work is expected to commence - most likely in 2012 once the site is clear of snow and mud. It is planned for the facility to be operational in 2014 with phases 2 and 3 to follow.

Shell Canada - Upgrader I (Expansion)

This is a second major operation that Shell Canada has in the Redwater area.

Company Overview:

Shell has been operating in Canada since 1911 and is one of the country's largest integrated oil and gas companies.

Project Description:

100,000 barrel per day expansion to the existing facility

Status:

It is in the final stages of construction. The commissioning and start up of the units is anticipated in late 2010 and early 2011.