Petro-Canada plans to reconfigure Edmonton refinery, inks Suncor processing deal

By OGJ editors

HOUSTON, Dec. 12 -- Petro-Canada plans to reconfigure its refinery in Strathcona County east of Edmonton and supply it with upgraded and refined oil sands feedstock through an agreement with Suncor Energy Inc.

Petro-Canada said the deal will enable it to process 53,000 b/d of bitumen, providing processing for existing and future steam-assisted gravity drainage (SAGD) production from its oil sands leases.

The two companies reached a 10 year, mutually beneficial processing and sales agreement whereby, beginning in 2008, Petro-Canada will ship at least 27,000 b/d of bitumen from its MacKay River oil sands facility 60 km northwest of Fort McMurray, Alta. to Suncor's oil sands plant north of Fort McMurray. There it will be processed into about 22,000 b/d of sour crude oil on a fee-for-service basis, blended with an additional 26,000 b/d of sour crude that Petro-Canada will purchase from Suncor, then shipped to Petro-Canada's Edmonton refinery for refining into finished product.

Suncor said that its agreement assumes that its own previously announced oil sands expansion plans—some of which are still subject to approvals—will proceed.

Petro-Canada earlier had applied for a permit to undertake a $4-5 billion (Can.) conversion of its Edmonton refinery to process the bitumen directly but will now spend about $1.2 billion to expand the existing coker and add hydrogen production and sulfur-handling facilities. The company said it would take a write-down this quarter for engineering and cancellation costs related to the original refinery conversion plan.

"We're shifting to bitumen-based feedstocks and providing for growth potential down the road, while taking advantage of desulfurization investment already underway," said Petro-Canada CEO Ron Brenneman. He said the key to the new arrangement is the way the desulfurization work dovetails with the feedstock conversion.

He added that the new arrangement would enable Petro-Canada to "develop future in-situ projects based on economics and technology, rather than needing to march in lockstep with refinery investments."

Petro-Canada reported that initially it would purchase 26,000 b/d of bitumen from other producers to fill out its bitumen processing capability, but eventually would replace that external feedstock with supplies from its next SAGD development.

Petro-Canada started injecting steam in its $290-million (Can.) MacKay River SAGD project in September 2002. The largest commercial operation of its kind in Canada, MacKay River was slated to ramp up to full production of 30,000 b/d by the end of this year and retain that level for the full 25-year life of the plant (OGJ Online, Oct. 14, 2002).

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