Publisher David Black, holding jars of diluted bitumen, announces a plan to build a $13-billion oil refinery in Kitimat, B.C, in 2012.BEN NELMS/Reuters
David Black is undeterred by skeptics and insists his vision for an export refinery makes sense for British Columbia's energy market and Alberta's oil sands.
For the past two years, the B.C. newspaper publisher has been investing his own money to get the ball rolling on Kitimat Clean Ltd., an ambitious project that aims to turn bitumen from the oil sands into refined products, such as gasoline, for shipping in tankers to Asian energy buyers.
"There is money to be made, but I got into this because I want to reduce the environmental risk," the founder and chairman of Black Press Group Ltd. said in an interview from Victoria. The risk that he is referring to is the fear of a massive oil spill from tankers off the West Coast, a concern that is shared by First Nations in British Columbia. If a tanker hauling gasoline were to leak in the waters near Kitimat, B.C., it will be easier to contain and clean the spill because the fuel won't sink to the bottom of the ocean like bitumen would, Mr. Black argues.
His venture carries a hefty $32-billion price tag – $21-billion for the refinery in Kitimat, $8-billion for the pipeline and $3-billion on other infrastructure and a tanker fleet.
Critics, however, say Kitimat Clean and a rival plan by Pacific Future Energy face long odds of ever becoming reality.
"The refined products market is very competitive," said Judith Dwarkin, chief energy economist at ITG Investment Research. "Refined products are more expensive to ship than crude."
"Refineries are being expanded in Asia and the Middle East, and these B.C. refineries would have to compete in competitive markets like Singapore and China," Ms. Dwarkin said.
While some energy industry observers have described him as a dreamer, Mr. Black prefers to think of himself as the catalyst for Kitimat Clean. His goal is to launch operations as early as 2020. If investors ever surface, he would turn over the reins to a consortium of oil giants. But oil companies have steered clear of Kitimat Clean, forcing him to make his own case to build a West Coast plant.
Mr. Black's project, unveiled in August of 2012, is the first of two proposals seeking to challenge the conventional wisdom that refining for the export market is too costly and risky. Pacific Future Energy, backed by Mexican conglomerate Grupo Salinas, announced its proposal in June by portraying the shipment of refined products as having an environmental advantage over bitumen.
"Many First Nations are simply saying that bitumen shipments aren't going to happen and they don't care if there are double-hulled tankers," said Stockwell Day, the former federal international trade minister who began serving last month as a special adviser for Pacific Future Energy.
Enbridge Inc.'s Northern Gateway pipeline plan is targeted at taking bitumen from the oil sands and getting the raw commodity into Asian-bound tankers leaving Kitimat.
The broader economy is on Mr. Black's mind. He is a former chairman of the B.C. Progress Board, a think tank of executives and academics who report on British Columbia's economy. He believes that Kitimat Clean would create much-needed jobs in British Columbia while protecting the environment from a potentially devastating oil spill on coastal waters.
Mr. Black, who has a civil engineering degree and an MBA, relishes the thought of leaving an economic legacy as he pursues what he views as a nation-building project.
He declined to detail how much money he has spent so far, but acknowledges that it is in the millions of dollars. He said Ottawa should consider loan guarantees to help get his project off the ground.
"It's come a long way. We have people in China who say that they will arrange all of the money for us and take all of the refined fuel, provided that there is some skin in the game from Canada," he said.
North West Redwater Partnership, a private-sector refinery project backed by the Alberta government, is slated to open in 2017 in northern Alberta. But North West is focused on supplying diesel to the Western Canadian market, not seeking export markets in Asia.
Brent Jang