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Delays at Sturgeon Refinery add to Alberta heavy oil price discount woes

CALGARY, A.B. – A new refinery touted as part of the solution to Alberta’s oversupply of heavy oil likely won’t begin processing oilsands bitumen until year-end, several months later than expected.

That means 80,000 barrels per day of diluted bitumen that would have been delivered to the $9.7-billion Sturgeon Refinery near Edmonton is instead joining the queue to be placed on overcrowded pipelines leaving the province.

Ian MacGregor, CEO of co-owner North West Refining, Inc., says multiple equipment failures have prevented the startup of the part of the refinery designed to break down heavy, sticky bitumen into an upgraded oil that can then be converted into consumer products.

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He says the refinery contains some 7,000 pieces of equipment and getting them all to operate in concert is taking more time than expected, with the latest setback involving a heat exchanger that was apparently damaged during installation.

Sturgeon, the first new refinery built in Alberta in more than 30 years, was completed 12 months ago and has since been producing diesel from synthetic crude upgraded at an Alberta oilsands mine.

MacGregor says the refinery is benefiting as high discounts on prices on stranded Alberta heavy oil have also begun to affect light oil and synthetic oil, leading to its feedstock costing as much as US$30 per barrel less than usual.

He says the refinery is currently producing between 35,000 and 40,000 barrels per day of diesel.

“I think we’re going to be running on bitumen by the end of the year,” he said in an interview.

“It will take a while to come up to full capacity because as we put bitumen into it, we’ll find other problems.”

The refinery is a joint venture of North West Refining and Canadian Natural Resources Ltd., which is to provide 25 percent of its bitumen feedstock. The rest is to come from the government-owned Alberta Petroleum Marketing Commission.

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