Stoughton 鈥� Before the end of the decade, there could be a new oil refinery near Stoughton, processing Saskatchewan oil and selling the finished product to Saskatchewan vendors.
On Dec. 1, Quantum Energy, Inc. of Tempe, Az., announced it was forming a Canadian subsidiary, Dominion Energy Processing Group, Inc. (DEPGI), whose focus would be building a 40,000 barrel per day oil refinery near Stoughton. The project is expected to cost of $600 million.
A week later the Quantum announced it had contracted 320 acres of land for the project, located immediately adjacent to the Crescent Point Energy Corp. Viewfield gas plant. That gas plant is 3.2 kilometres west and 4.8 kilometres south of the intersection of Highways 13 and 47, the southern edge of Stoughton. The land location for the proposed refinery site is the western half of 8-8-8-W2, according to Guy Shepherd of Moosomin鈥檚 Farm Boy Realty, who handled the transaction.
The Crescent Point Viewfield facility is also connected the Tundra Energy Marketing Ltd.鈥檚 (formerly Enbridge鈥檚) Westspur pipeline system, the principal gathering network for southeast Saskatchewan. 听
Keith Stemler is CEO of Dominion Energy Processing Group, Inc. Pipeline News spoke to him by phone at length on Dec. 14.
Incorporated nationally, Dominion鈥檚 corporate headquarters will be in Regina.
As their chosen site is right beside Crescent Point Energy鈥檚 main facility in the prolific Viewfield Bakken region, which has its own associated rail loading facility a few kilometres to the north, we asked about their relationship with Crescent Point.
鈥淲e鈥檙e in negotiations with them on a feedstock, but that鈥檚 still not been 100 per cent finalized. But they鈥檙e part of our strategic alignment in the location. That鈥檚 all I can say at this point,鈥� Stemler said.
The announced capacity, 40,000 bpd, is not far off from Crescent Point鈥檚 production in the area. A few years ago, Crescent Point was producing over 50,000 bpd from its Viewfield area. Will this refinery act as a merchant refinery, and accept crude from surrounding producers, or would it be locked up largely, and perhaps exclusively, by Crescent Point?
Stemler said, 鈥淪till undecided. We鈥檙e still working with about three other vendors, not directly, but indirectly, to make sure we get our volumes.
鈥淲e understand what the pipeline connection points are, and where we might have to tap off a line. But we鈥檙e still in negotiations with different vendors to make sure we get our 40,000. So the volume is still in the works, as far as our daily volumes.鈥�
Their own gathering system from other suppliers has been discussed. 鈥淲e haven鈥檛 moved forward on any sort of avenue with regards to (a) collection system. But it鈥檚 been discussed. In the area, we鈥檝e looked at the network that鈥檚 there. There鈥檚 been a variety of different discussions on meeting the volume of 40,000,鈥� Stemler said.
When it comes to transporting out refined product, he said, 鈥淲e鈥檙e a little premature. We鈥檝e been discussing some off-take situations with different off-take vendors that we want to work with. There鈥檚 been some question with regards to railing it, or trucking it into the Regina or Estevan area. The product would be staying in Saskatchewan. As far as the movement goes, right now we鈥檙e still discussing trucking.
鈥淎s far as upgrading the infrastructures around the plant, it has been discussed with the municipality, as well as the Ministry of the Economy. We have discussed all those points on traffic. One of the key things about the traffic is just how the infrastructure is designed, how it鈥檚 built, what do we need to do to rehabilitate it to get it to a level of comfort, just to get our equipment it. It is definitely a huge discussion point at this time.鈥�
鈥淲e鈥檙e still in the detailed design stage,鈥� he said.
Construction
As for cost, he said, 鈥淩ight now our budget is set at $600 million. That includes our water feeds, from start to finish, all our construction, infrastructure upgrades; that鈥檚 our whole budget right now.鈥�
鈥淩ight now, from start to finish, the first oil we would still like to get a finished product in 2019. It would be 2.5 to three years to complete.鈥�
When they begin scratching dirt boils down to the permitting process, he said. 鈥淚f we can turn the permit around, as discussed, we could possibly start turning dirt in July/August 2017. That鈥檚 our target.鈥�
鈥淭he total footprint is 320 acres. The biggest part of our footprint is going to be our water collection system. Water is a key component to a hydrocarbon plant, right? We鈥檝e got a variety of ponds. So we鈥檝e got a good portion of land for water, recirculation and recovery system.
鈥淭he initial plan for Train 1 will be offset of the centreline of the property, allowing us for future expansion as well. With this footprint, that plant, with tank storage, will sit on 180 to 210 acres. So it鈥檚 a big plant.鈥�
During construction, on the civil side going into the mechanical phase, he expects about 200 people at work. 鈥淥n the operating staff, it will be 60 people to run it, for the one plant,鈥� he said.
The slack labour and housing market is definitely one of the drives behind the project. 鈥淲e鈥檙e trying to catch this little downturn in the market, not only for better steel prices, but the mod yards are a little bit slower now. We would use mod yards in Saskatchewan. We鈥檝e got a couple chosen vendors.鈥�
On local housing, he said he鈥檚 met with the mayor of Stoughton with regards to building new houses or a subdivision, if required. There is housing available, and lots of hotel space available, he noted for the build phase.
Expressing a preference for local contractors, he said, 鈥淲e want to try to get as many local people as possible so we don鈥檛 get into that situation, as far as camps and hotels. We鈥檙e not at that level at this point in time. I have checked out the local area, as far as camps, hotels, even restaurants and how the guys will get food.鈥�
As for tank storage, there is still detailed design work to be done, looking at things like how much surge storage will they need, and can some be stored below ground?
鈥淥n the finished product side, we鈥檙e probably going to run into 鈥� 480,000 barrels of finished storage is what we鈥檙e planning right now. That would include our slop tank and EDP.鈥�
Refined product
They are not seeking to export finished product to the U.S., but rather to sell it in Canada, for consumption in Canada. 听The facility would produce 21,540 bpd of retail gasoline and 13,600 bpd Jet and/or ULS diesel. It would also produce natural gas liquids, drilling mud oil, ULS fuel oil, sulphur and carbon dioxide.
鈥淥ur intention is to get to the rail distribution. If we can get to the transload, and we haven鈥檛 even discussed that with any of the rail people at this point of time. We鈥檙e still negotiating different things for offtakes. Part of that offtake is depending on what the vendor wants to do as well. If they want it railed, we鈥檒l work on those terms with the rail people. But at this time, we鈥檙e just getting into the technical part of the offtakes. It鈥檚 up to the vendor. The vendor will dictate how he wants to see the product flow in the long term.鈥�
He used an example of a small gas station company buying gasoline from Fort Saskatchewan, Alta. They would pay freight on board (FOB) at the rack. 鈥淵ou pull your truck in, you fill it up truck and away you go,鈥� he said. 鈥淭hat鈥檚 typically how you go. Now, on a long-term situation, the purchaser of the product might want to rail it, because he鈥檚 shipping it somewhere else or it鈥檚 going to be a drop-ship type component on his end. Done. It still hasn鈥檛 been determined. But we still would like to see all the product stay in Saskatchewan. That鈥檚 the whole intent of this.鈥�
Is there enough demand?
鈥淥h yes, definitely,鈥� he replied.
Hydrocracking refinery
Stemler said it would be a hydrocracking refinery. That鈥檚 a more complex refinery than, say, a topping refinery. 鈥淚t鈥檚 all wet,鈥� he said. 鈥淭his is all hydrocracked, atmospheric cracked. No coker. We don鈥檛 need to put in a coker. With this sweet crude, we don鈥檛 have to.鈥�
Salt and H2S will be stripped out, he noted.
Other projects
Dominion鈥檚 parent company, Quantum Energy Inc., has made similar announcements and land deals at Baker, MT, Fairview, MT, Stanley, ND and now Berthold, ND in 2014, before the crash in oil prices that has resulted in a two year downturn. Asked what has happened with those projects, Stemler said,
鈥淭he Berthold one has been in permitting now for several months. It鈥檚 continually working with the State of North Dakota. That鈥檚 part of the dilemma. We do have the land. So it鈥檚 just a matter of excercising some certain options with permitting.
鈥淚 don鈥檛 know all the details. I don鈥檛 deal with that plant. There鈥檚 another group in the States that鈥檚 diligently working towards 鈥� There was some changes in management in Quantum in the last year. So they鈥檙e still working on it.鈥�
Asked what they鈥檙e doing differently in Canada to ensure the success of the Stoughton project, he said, 鈥淭he Canadian group, we鈥檝e been working with the government for about 18 months.鈥�
鈥淭he capabilities, I think, are a little different in Canada.
鈥淚 think there鈥檚 more coordination, can we say, between the company, the government and the local administration, the RMs and stuff that are welcoming this plant which allowed us the confidence to move forward at a more rapid pace.鈥�
Pipeline News spoke to Ed Dancsok, Assistant Deputy Minister, Senior Strategic Lead for Petroleum and Natural Gas Development, Ministry of the Economy, who confirmed the refinery proponents have been speaking to the government for about 18 months.
Stemler said, 鈥淭o start one of these projects is a huge task, because there鈥檚 an alignment on stakeholders that it takes a long time to develop what you鈥檙e going to do, just in a planning stage. Now that we鈥檝e completed that planning stage and the first part of our stakeholder alignment, it allowed us to move forward and start to announce the project. Are we a long way away? We鈥檙e still through a lot of negotiations. It鈥檚 not that easy just to throw out an announcement. There鈥檚 a lot of background that鈥檚 been done 鈥� carbon emissions, carbon tax problems, is it a federal thing? There鈥檚 a lot to this. I think some people are saying this just came out of the blue. It maybe it did on the announcement, but in the background, no, we鈥檝e been working. We鈥檝e had a team on this for quite some time.鈥�
CO2
Quantum鈥檚 Dec. 14 press release noted the project would have 鈥淐O2 recapture to limit greenhouse emissions and to support long-term tertiary recovery for EOR within the Canadian Bakken/Torquay region.鈥�
It would also have the development of an 85 megawatt steam driven co-generation power plant that will not emit atmospheric CO2.
Asked about carbon capture, which cost $1 billion to add to a coal-fired generating unit at SaskPower鈥檚 Boundary Dam Power station, Stemler said, 鈥淭here鈥檚 a difference between an outside the boundary (OSB) recapture system, where you have to actually produce another product to capture the CO2. So in our state, we have a design which is proprietary, we鈥檝e designed this over the last couple of years, where we actually do this in-line. So the equipment is far different from what they have right now. It鈥檚 very high tech stuff. It鈥檚 proven. It works. I can鈥檛 tell the plant. They鈥檝e already set one of these up in the United States and it works fantastically. Hopefully, this group, we鈥檝e employed them to come on board with our engineering group to work through all the details with us as well.鈥�
They鈥檝e already got a carbon dioxide buyer lined up. Stemler said, 鈥淩ight now, the CO2 that we recapture is already claimed by a vendor. It is a purchased product. That offtake has already been committed to. So part of the plan was, if we recapture, do we have a buyer? Yes, we do.鈥�
The captured carbon dioxide would be used for CO2 enhanced oil recovery (EOR). This process has been used in the nearby Apache Midale Unit on at test basis since 1984 and on commercial scale for over a decade. It is also used, to a greater extent, in the Cenovus-operated Weyburn Unit.
Small refineries in Williston Basin
The Stoughton announcement is part of a movement towards small refineries in the Williston Basin. In recent years, WBI Energy Inc., (a subsidiary of MDU Resource Group Inc.) built the 20,000 bpd听 Dakota Prairie Refining LLC听 project near Dickinson, N.D. In June 2016 Tesoro Refining & Marketing Co. LLC bought that plant, making it Tesoro鈥檚 second refinery in the state. 听
Meridian Energy Group, Inc. 听is in the permitting process to begin construction in 2017 of the Davis Refinery, at Belfield, N.D., just a few kilometres west of the Dickinson refinery. These are in addition to Quantum鈥檚 previously announced plans for multiple refineries throughout North Dakota and Montana.
Stemler explained how new, small greenfield refineries now make sense, when hardly any new refineries have been built in North America over the last three decades. He said, 鈥淚f you鈥檙e specific on what your feedstock is, you can design the kit, the actual processing system, to meet that oil, without upgrading. If you take off a blended product line, like the Tundra line, you require an upgrader. As soon as you start to get into upgraders, your facility requirements start to change. Then you鈥檙e into the billions of dollars on the spend.
鈥淔or merchant refineries, they have to be designed and operated much more technically, with a lot more logic in them to provide a finished product off a modulated crude slate.
鈥淭hese plants, although they鈥檙e small, technically they鈥檙e so advanced, they can handle a change in product, but not a drastic change. So in the Bakken, if you look at how MDU did their plant 鈥� and this is probably part of our delay, because we dissected that plant 鈥� what they did wrong, what they did right, what made them different from others. Through the lessons learned, we were able to increase our design immensely while still staying on a good budget.
鈥淚f you take a big plant, to redo Co-op, would probably be maybe $6 billion. But for $600 million, you can do smaller merchant refineries. And if you do three of them, your output quantities are going to be relatively the same. But you design the plant for the local feedstock, whether it鈥檚 Bakken, or, maybe if you go into southwest Saskatchewan where your feed is going to be a little different, you design the plant for that specific product. That鈥檚 the difference.
鈥淵ou want to stay away from upgrading. Upgrading is where it really gets into environmental concern, cost concern, waste concern. There are so many different issues with an upgrader.鈥�
As for possible expansion down the road for Stoughton, Stemler said, 鈥淚t depends on the offtake commitment. We鈥檙e talking to different groups in regards to how we configure that side of the plant. We鈥檙e still waiting on feedback from a European company as well as a Canadian company about putting in a specialty plant that can feed off the main system. So we鈥檙e looking at a couple of different things.鈥�
Asked why the websites for both Quantum and Dominion do not include phone numbers or street addresses, he explained, 鈥淎s we grow, more information will be put on those websites. We didn鈥檛 want to publish private phone numbers until we get to that corporate level where we鈥檙e headed to in the New Year. So once we get that corporate level, that corporate identity set up, yeah, those websites will grow.鈥�
Town hall meetings
There will be two upcoming town hall meeting in Stoughton in early 2017. At a later date, they will have a contractors meeting as well. Stemler doesn鈥檛 want to be overrun with potential contractors at the public meetings, should any sort of problem arise that could delay the start date.
鈥淚t鈥檚 essential people know it continues to move forward in a positive manner. That鈥檚 what we鈥檙e trying to ensure to, not only the stakeholders, but also the investors in the company. I鈥檝e been at this for two years, and it鈥檚 kind of my project. I see good things for the local community. I see good things for the province, as we push forward. That鈥檚 really what we鈥檇 like to achieve at the end of the day. That鈥檚 what we鈥檙e working towards,鈥� Stemler concluded.
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The Refinery That Wasn鈥檛 series of stories, published May 30, 2018
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