July 26, 2008 at 11:00 am #3511
Suncor’s coke solution? Ahoy, Port Alberta
PATRICK BRETHOUR July 25, 2008 Toronto Globe & Mail
PRINCE RUPERT — The massive pyramids of coal on Prince Rupert’s Ridley Island are anonymous, but one has a story to tell.
The coal pile in question belongs to oil sands giant Suncor Energy Inc., which is already shipping a half-million tonnes a year through Prince Rupert to Asian and Mexican ports. Suncor hasn’t decided to branch out into the coal mining business. The coal – to be more precise, petroleum coke – comes from its upgrading operations in Fort McMurray, Alta.
Although it looks and feels like coal, petroleum coke is literally the dregs of the (oil) barrel, the leftovers after crude oil and other liquids have been extracted from gooey bitumen. Until recently, petroleum coke has been something only a step above industrial waste: worth little, but a potentially big environmental headache for oil sands firms that are far from any sizable market.
Suncor alone stockpiles three million tonnes of the stuff in a year; it burns a million tonnes to power its upgrading operations, but that amount is not likely to rise because of coke’s heavy carbon footprint. So, every year, the stockpile in Fort McMurray grows ever bigger, with just a trickle dribbling out to the West Coast. Without an outlet, the best use of petroleum coke will be as landfill – far from an ideal material, if the seemingly eternal underground coal fires of West Virginia are any guide.
But a confluence of tectonic shifts in the energy market, and a somewhat obscure short-line railway, are radically altering the economics of petroleum coke. Oil sands production, propelled by soaring prices, is on a rocket ride. That will drive up the volume of petroleum coke, particularly at Suncor, which will be producing close to nine million tonnes by 2012, making it one of the largest sources of coal in Canada.
Rising coal prices are key. Even though petroleum coke sells at a discount to thermal coal, its price increased fivefold in the middle part of this decade, and has continued to rise since. What had been a problem for the oil sands could now be transformed into profits – if it can be brought to market.
And that is where Prince Rupert, and a little heralded acquisition by Canadian National Railway Co., come in. Last December, just before Christmas, CN issued a press release detailing its purchase of the line running from Fort McMurray to Boyle, Alta., a dilapidated line bought for a bargain $25-million, plus a vow to spend more than five times that amount on upgrades. Long-term volume guarantees from Suncor, and two other oil sands producers, OPTI Canada Inc. and Nexen Inc., were a cornerstone of that acquisition, according to CN.
By the time Suncor is pumping out nine million tonnes of petroleum coke in 2012, those upgrades will be long completed, opening the path for the export of an enormous volume of petroleum coke from Fort McMurray, through the Rocky Mountains, to Prince Rupert and Ridley Island – and on to Asia. At today’s prices, that amount of petroleum coke would top $1-billion a year – even for an oil sands company, that is serious money.
For Don Krusel, chief executive officer of the Prince Rupert Port Authority, the prospect of handling mass volumes of petroleum coke, along with other Prairies commodities, is part of his vision of turning the shipping route in northern B.C. waters into a transit corridor snaking back into the middle of Canada. He’s hoping that the upgrades to the port, including the new container ship facility, will shift the mindset in landlocked provinces, opening their eyes to the possibility of Asian exports, and to thinking of Edmonton, Lloydminster and Fort McMurray as part of one export system that leads to the open waters of the Pacific. Mr. Krusel has a phrase that sums up that shift in thinking: Port Alberta.
Petroleum coke is part of Port Alberta. Sulphur – another formerly unwanted byproduct of the oil sands – could be as well, if Ridley Terminals is successful in finally getting its specialized facility up and running. Canpotex’s recent announcement that it will build a potash facility on Ridley Island is also part of the picture. Mr. Krusel sees a day, not too far away, when grain, sulphur, even beef and poultry, are flowing from the Prairies through to Asia.
July 26, 2008 at 11:17 am #6691
Here is update on Suncor’s coke solution (today both Suncor & Syncrude put lot petcoke into ~permenant storage). While a Lot details are ~ in right range, there are lot others are way off (ie Suncor does make about 2.5-3.0 mm tpy but it only burns about 750 kmpty not 1 mm tpy and it has been shipping about 350-500 kmtpy to asia via Sinoway (met agent at McCloskey Petcoke convention). Suncor has 2 coking units (8 drum & 6 drum -just finished add +2 drums) which makes ~3 mm tpy they mention but will ramp up to ~4mm tpy when last 2 drums on 2nd coking unit get enough feedstock from Firebag stage. They plan on a 3rd upgrader with a 3rd coking (6 drum) unit by 2012 but best it could produce would be ~2.5-3 mm tpy additonal so not sure where they get 9 mm tpy total (unless they are counting Syncrudes fluid coke also).
I understand they finally did put in 10-15 mile local railway to get to major CN Canada railroad for shipment to West coast on petcoke exports that eleminated portion of bigger trucking cost and is one reason (outside price increase) export volume is above the 350 kmtpy. Think most railroad stuff might be correct. But wouldn’t be charging full ahead on this looking at what is likely happen in next 6 months or so in economy and current commodity prices!!
I think the unwinding of speculation impacts on commodities, the financial problems US and upcoming recession cycle will have lot to do about correcting the current unrealistic $200/ton FOB coal & petcoke prices that are driving this effort (still it will be good once it gets in place & it would be used) – however just read some UBS technical reports that claims July 11, 2008 this year the S&P/DJ markets crossed same “Technical death cross sell point” indicator that market had before the 2001 collapse (just name that point scares crap out me – I felt 2001 market downfall). And from looks charts everyone needs buckle for next 6-8 months!
<I usually take economic projections with grain salt but if Really wanted terrorize you I would tell you about trying read thru Dec 2007 article on 4th Knodratieff Cycle Winter stage (downward) that they say 4th Winter cycle really started in 2000 and will continue (same as other 3 Long waves) for next 8-20 years (we are already at 8 yr mark so guess this means 2013-2020 before it ends) and points out lot speculation, commodities price & financial weakness today is as bad as in the 1920 cycle! Course these wave cycles overlap and 5th wave has already started Here is link Bolder Investments pdf July series: (see @ http://www.thelongwaveanalyst.ca/pdf/07_12_04_News.pdf )>
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