FOCUS: Canada chems wary of oil sands upgrading

12 October 2006 21:00  [Source: ICIS news]

TORONTO (ICIS news)--Recent deals by energy firms to upgrade Alberta’s oil sands in the US could deprive Canada's chemicals industry of significant opportunities for additional feedstock, Canadian Chemical Producers Association (CCPA) said on Thursday.

 

Upgrading of oil sands yields huge volumes of ethane and propane-rich off gases which can be processed and converted into petrochemical feedstock, CCPA vice-president Dave Podruzny told ICIS news in a telephone interview from Ottawa.

 

A propylene project near Edmonton, Alberta by US energy firm Williams is already using off gases from the Suncor oilsands as feedstock, and with the growth in Alberta’s oil sands sector there are many more such opportunities, he said.

 

“From a value-added point of view, we [CCPA] are strongly in favour of integrated upgrading and refining of oils sands in Canada,” Podruzny said. CCPA has been involved in feasibility studies for an integrated oil sands-based upgrading-refining-petrochemicals project in Alberta, he added.

 

However, upgrading of oil sands outside Canada deprives its chemicals industry of this feedstock opportunity, Podruzny said with reference to plans by energy firms to upgrade and refine their oil sands in the US. EnCana recently announced plans to upgrade its oil sands in Houston under a joint venture with ConocoPhillips, and BP said it would expand and reconfigure its Whiting, Indiana refinery to process Canadian oil sands.

 

But Podruzny added that from the energy companies’ point of view upgrading and refining outside Alberta may make economic sense, given the strained labour and cost situation in that province. According to analysts at Toronto-based credit ratings agency DBRS, there are six oil sands projects in Alberta, with a combined production of 1.2m bbl/day, that currently have no plans for integrated upgrading capacity.

 

Commenting on the sharply rising use of natural gas by Alberta’s oil sands sector, Podruzny termed this as a “bit of alchemy in reverse” in that “clean” natural gas is used to help produce relatively expensive bitumen-based oil.

 

From the Canadian chemical industry’s point of view, ways must be found to ensure that natural gas supplies are appropriately streamed, ensuring that the oil sands are using only dry gas, and not wet gas, or that natural gas liquids are extracted from wet gas before it is burned by the oil sands, he said. One alternative could be for the oil sands industry to switch to coalbed methane, he added.

 

“In fact, dry gas is better for them, they don’t need the wet gas” which has much better value-added use as a petrochemicals feedstock, Podruzny said. With natural gas prices still at high levels, the oil sands industry is very much aware that gas use is not optimal and it is casting around for alternatives, he said.

By: Stefan Baumgarten
+1 713 525 2653

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