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Peace upgrader at starting gate: Work on first phase to begin this summer Edmonton Journal Mar 22 Page: G1 / FRONT Section: Business Dateline: EDMONTON Byline: Gordon Jaremko EDMONTON - Work is scheduled to start this summer on a $782-million project that will accelerate development of Alberta's least-tapped oilsands deposit in the Peace River region. PRO Upgrading Inc. set a target of 2010 for up to 1,200 workers to finish a 25,000-barrels-per-day first stage in a new bitumen processing plant, named Bluesky Upgrader, near McLennan, 320 kilometres northwest of Edmonton. After raising 60 per cent of the construction budget in its first two months on hot financial markets for oilsands action, the firm is considering adding a diesel fuel refinery that would increase the project's cost to about $1.1 billion. "We don't foresee any problems at all," said Don Allan, who co-founded the Red Deer-based private company with his brother Doug and serves as business development director. PRO, short for Peace River Oil, is new to the oilsands but a veteran of large-scale resource processing and northwestern Alberta industry. As Northern Alberta Nitrogen, the Allans ran a towering fertilizer plant on the high-plains site of the planned bitumen upgrader. The brothers mothballed the regional landmark due to steeply rising prices for its raw material, natural gas. Investor interest in the oilsands is "terrific," Don Allan said in an interview. PRO will raise the final 40 per cent of its construction budget in 90 days on private Alberta money markets without converting into a public company and starting complex stock exchange share sales, he predicted. The northern community is also enthusiastic after preliminary meetings between PRO and regional business and municipal leaders. "We're interested," said Greg Radstaak, economic development officer for Smoky River Municipal District. "We haven't really seen any large benefits yet from oilsands activity that's just starting here." The upgrader project would provide a greatly needed economic boost, said Smoky River Reeve Don Dumont. The agricultural community loses population at a rate of 300 or 400 every five-year census due to farm consolidation and an exodus of local youth to jobs in Edmonton, Grande Prairie and the oil industry, Dumont said. A formal construction application will be made to the Alberta Energy and Utilities Board by May, Allan said. About 14 months of preliminary discussions with the board left the firm optimistic the project can obtain speedy approval. Environmental questions are inevitable, but the site is "brown-field" or already industrial and in a remote spot where the few residents are accustomed to a large plant, Allan and Dumont both said. 100,000 BARRELS A DAY PRO's plans call for development of a 100,000-barrels-daily upgrader in four 25,000-barrel stages. All output from an added diesel fuel refinery could be sold locally and into the Northwest Territories, Allan added. Northern farms and transportation use six times as much diesel as the plant could make, he said. Construction, starting with early work on site conversion and storage installations this summer, will be continuous as oilsands developers accelerate work after buying 830 square kilometres of new bitumen leases in the region during the last six months alone, Allan predicted. PRO's project is designed to serve budding Peace River oilsands producers such as BlackRock Ventures, Penn West Energy Trust, EnCana Corp. and Koch Exploration Canada. "We would like to see upgraders in Alberta," BlackRock president John Festival said in an interview. "We would like to see these projects go ahead, be built and work." BlackRock alone is increasing its oilsands output by up to 4,000 barrels per day every year, with Festival reporting Peace River operations are profitable, but the entire industry can use a boost only upgraders can provide. Prices fetched by heavy oil and bitumen are deeply discounted by one-third or more off benchmark grades of refinery-ready light crude. Upgraders do double duty by making higher-value products and preventing bitumen production gluts, which are liable to worsen the price discounting. Shell Canada plans an added boost for Peace River oilsands development this fall. After 27 years of production experiments, the company hopes to apply to the AEUB in September for a 35,000-barrels-daily first stage in a 100,000-barrels-plus megaproject, Shell public affairs officer Adrienne Lamb said. firstname.lastname@example.org PHOTO/IMAGE: Graphic/Diagram: The Edmonton Journal / (See hard copy for graphic.); Colour Photo: Bloomberg News / A dump truck carries a load of bitumen at Syncrude's Aurora mine near Fort McMurray. Investor interest in the oilsands is spreading to McLennan, 320 kilometres northwest of Edmonton, where a processing plant will be built.
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