Getting taxpayers a better deal on the Sturgeon Refinery
The Alberta government is getting a better deal for Alberta taxpayers on the Sturgeon Refinery, reducing risk and saving an estimated $2 billion.
This timely and necessary step will optimize the refinery’s value and give taxpayers greater control over its operations.
Under the new deal, the Government of Alberta becomes a 50 per cent equity partner in the refinery. Canadian Natural Resources Limited (Canadian Natural) will continue to hold 50 per cent equity. There is no additional cost to taxpayers resulting from this process.
The estimated $2 billion in long-term savings is due to an improvement in net present value (NPV) for taxpayers through the government. Simply put, it will be less of a financial commitment for the government over time. The restructured deal also reduces the previous operational risks under the original contracts by significantly streamlining the ownership of the Sturgeon Refinery.
“We are taking action to get a better deal for taxpayers and reducing long-term costs. This agreement provides more economic certainty which will benefit Albertans today and into the future. We look forward to our renewed arrangement with the refinery’s operator, the North West Redwater Partnership, in the years to come.”
Sonya Savage, Minister of Energy
About the optimization
As part of the process, the government is transferred a 50 per cent ownership interest previously held by North West Refining.
This process will not cost taxpayers any additional funds than the government would otherwise be obligated to pay as a toll payer.
Through the agreement, the government is able to capture the value of processing bitumen as both a toll payer and facility owner.
This plan improves the government’s net present value for the refinery by approximately $2 billion over the life of the project. Net present value is the difference between present value of cash inflows and the present value of cash outflows over a period of time.
The plan also frees up $1 billion in cash flow to the government over the next five years. The additional cash flow is a result of the restructuring.
The agreement includes a 10-year extension of the processing agreement to 2058.
The plan will provide a simplified governance structure for the refinery.
With this optimization, the government has an equal vote in the control of the refinery to which it is the majority toll payer.
Canadian Natural will provide operational leadership to North West Redwater Partnership.
Canadian Natural will help maximize efficiency and production capacity for the benefit of the entire value chain. This includes looking at ways to improve uptime, enhance operating efficiency and costs.
Assuming an ownership position will enable greater government returns in the project’s upside.
About the Sturgeon Refinery
Prior to this announcement, the Sturgeon Refinery was owned and operated by North West Redwater Partnership, which was owned in an equal 50-50 split by North West Refining Inc. and CNR (Redwater) Ltd., a subsidiary of Canadian Natural Resources Limited.
The Sturgeon Refinery is designed to process approximately 79,000 barrels per day of diluted bitumen from Alberta’s oil sands into higher value products like low-carbon low-sulphur diesel, vacuum gas oil, diluent and natural gas liquids.
The Alberta Petroleum Marketing Commission (APMC) manages the government’s commitment to the Sturgeon Refinery. APMC’s previous commitments included:
responsibility for 75 per cent of the refinery’s feedstock
committed to a 30-year processing agreement
The Sturgeon Refinery incorporates carbon capture into its design. The captured CO2 is exported to the Alberta Carbon Trunk Line and the end users sequester it – a source of revenue for the project. The CO2 captured is the equivalent to emissions from 300,000 cars annually.
In April 2020, the Sturgeon Refinery successfully transitioned from primarily processing synthetic crude feedstock to bitumen feedstock and reached commercial operations on June 1, 2020.
Kathleen Ganley, NDP Critic for Energy, made the following statement in response to the Kenney government taking a 50 per cent ownership stake in the Sturgeon Refinery:
“Albertans should be deeply concerned that Jason Kenney has made them part owners of one of the most notorious Conservative boondoggles in Alberta history. It’s unacceptable that neither the premier nor Minister Savage made themselves available to take questions from the public on the details of this deal.
“Albertans have a right to see the complete agreement and understand all the details of the potential new risks and liabilities. Jason Kenney’s record on energy investment is abysmal. He lost $1.3 billion of taxpayers’ money on his purchase of the doomed Keystone XL project. Now he has taken on part ownership of a refinery that, according to Alberta Energy’s most recent Annual Report, has a negative net present value of $2.5 billion.
“Albertans don’t trust Jason Kenney. I call on him to release all of the details of this equity agreement immediately and make himself available to take questions from the media and Albertans.”