CALGARY, April 17, 2015 /CNW/ - North West Redwater
Partnership would like to correct certain comments and economic
figures as reported in the article titled "The North West Sturgeon
Upgrader: Good Money After Bad?" from The School of Public Policy,
Volume 7, Issue 3 dated April 2015
(the "Paper").
There are a number of errors in the understanding of the project
and value of the products that it makes. Together, these
errors in the analysis have the effect of overstating the total
processing fees per barrel being estimated by more than 50%.
Specifically:
- The paper determined the costs per barrel by reference to
50,000 barrels per day of raw bitumen. This is not
appropriate because the feedstock the refinery will process is
diluted bitumen in the quantity of approximately 78,000 barrels per
day. By using the wrong feedstock and quantity the processing fee
is over stated by over 55%.
- The future tolling costs as reported by the Alberta Petroleum
and Marketing Commission. ("APMC") are based upon certain
estimates, including a provision for future inflation.
Therefore the Paper is comparing future inflated costs to current
market day refining costs.
Adjusting for these items, the real cost of the Toll in today's
dollars is less than $35 per barrel
of diluted bitumen processed rather than the $63 per barrel of bitumen reported in the
Paper.
The Toll is designed to repay all debt and equity within the
first 30 years of its operation (less than 50% of its potential
service life). The APMC and Canadian Natural Resources
Limited, as toll payers ("Toll Payers"), have an evergreen option
to continue utilizing the refinery for the remainder of its service
life at the current operating costs plus a performance incentive
margin earned by the North West Redwater Partnership. The
operating cost per barrel in today's dollars is approximately
$15 per barrel, resulting in forecast
positive margins for the APMC in the future. This was not
considered in the Paper.
Furthermore, this Toll should be taken in the context of the
value to the feedstock providers. The Refinery will upgrade
bitumen beyond the level of upgraders in Fort McMurray and make a variety of products
including diesel, naphtha, Vacuum Gas Oil and diluent rather than
synthetic crude oil. This production slate is significantly more
valuable than synthetic crude oil.
As an example, diesel prices are still very robust even in the
current economic environment, with the Edmonton Area whole sale "rack discounted"
price remaining at $50/bbl above
Western Canadian Select or about $36/bbl above West Texas Intermediate. At
these levels the Refinery will generate profits for the Toll Payers
and their stakeholders.
SOURCE North West Redwater Partnership