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B.C. sees two competing oil refinery proposals near Kitimat

“We are finally making this vision a reality, and this is the first step,” Mr. Salameh said in an interview, vowing that the proposed bitumen refinery will eliminate a byproduct called petroleum coke, which is a major source of greenhouse gas emissions.


British Columbia now has two competing proposals for oil refineries near Kitimat, both betting that pipeline projects have become so unpalatable that plans to ship Alberta bitumen by rail are more likely to be approved.

The bitumen refinery projects add to the 20 B.C. proposals to export liquefied natural gas. Experts say only a handful of LNG ventures have a realistic chance amid fierce global competition.

"There is going to be a shakeout of viable projects," said Mary Hemmingsen, a partner at consulting firm KPMG Canada.

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Samer Salameh, executive chairman of the latest B.C. oil refinery project to embrace rail, Pacific Future Energy, said his top priorities will be committing to rigorous environmental standards and recognizing aboriginal rights. He said for energy plans to be successful in British Columbia, they must develop technology to keep carbon dioxide emissions to a minimum and hold respectful talks with First Nations.

Pacific Future Energy filed a 120-page project description with the B.C. Environmental Assessment Office and the Canadian Environmental Assessment Agency this week.

"We are finally making this vision a reality, and this is the first step," Mr. Salameh said in an interview, vowing that the proposed bitumen refinery will eliminate a byproduct called petroleum coke, which is a major source of greenhouse gas emissions.

Newspaper publisher David Black said he remains keen to press ahead with his rival project Kitimat Clean Ltd., which also aims to convert bitumen from the oil sands into refined products for shipping in tankers to Asian energy buyers. He estimates that his larger refinery would cost $22-billion (U.S.) to construct.

Kitimat Clean wants to ship diesel, gasoline and other refined commodities through Douglas Channel from a dock in Kitimat.

By contrast, Pacific Future Energy is targeting exports from Portland Inlet, roughly 120 kilometres northwest of Kitimat.

"I looked at Portland Inlet, but it is a long way away," Mr. Black said Thursday.

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He has commissioned engineering firm Hatch Ltd. to write a project description for environmental regulators, aiming to file the document by early February. "We're pretty confident in what we've got," he said. "There will be millions of dollars in consulting reports they want."

The construction phase would cost billions of dollars. "The trick in all of this stuff is to put yourself in the position where you can raise the capital to do it. I've been spending my own money to get through the initial work, which is fairly extensive," Mr. Black said.

He has selected the Dubose Flats site, which is on provincial Crown land midway between Terrace and Kitimat, but he is also investigating the Wedeene property near Kitimat.

Pacific Future Energy and Kitimat Clean have plans that rely on transporting Alberta bitumen by rail to the Dubose Flats industrial site north of Kitimat. Jacques Benoit, Pacific Future Energy's chief operating officer, said the commodity to be moved by train would be near-solid "neatbit." Mr. Benoit and his colleagues say they like to use the term because it reminds them of whisky without water or ice – neat and not diluted.

For now, the consistency of bitumen that moves inside North American tank cars resembles molasses. That substance is called dilbit, but neatbit has a form similar to cold peanut butter so neatbit would be less prone to spill in case of a derailment, Mr. Benoit said.

Judith Dwarkin, chief economist at RS Energy Group in Calgary, said it remains to be seen whether transporting bitumen by rail from Alberta to B.C. makes economic sense.

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"You have to heat the bitumen to load and unload the rail cars. You need special insulated rail cars, and there are weight limitations on rail cars," she said.

And there is uncertainty over demand for imports of refined petroleum products into Asia, adding to the risk taken on by the B.C. bitumen refining projects, Ms. Dwarkin said.

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About the Author

Brent Jang is a business reporter in The Globe and Mail’s Vancouver bureau. He joined the Globe in 1995. His former positions include transportation reporter in Toronto, energy correspondent in Calgary and Western columnist for Report on Business. He holds a Bachelor of Commerce degree from the University of Alberta, where he served as Editor-in-Chief of The Gateway student newspaper. Mr. More


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