On August 15, 2008 Alberta Energy and Alberta Finance and Enterprise issued a
Request for Expressions of Interest (REOI) soliciting interest in using Bitumen
Royalty-in-Kind (BRIK). The expressions of interest were not legally binding
and were not a pre-requisite for participation in any future Request for
Proposals (RFP). In 2009 an RFP was issued.
Submissions were received from both domestic and international companies;
most importantly firms expressed interest in:
Projects to process royalty bitumen to add value within the province (e.g.
upgraders, refiners, petrochemicals);
Projects that requested a secure supply of royalty bitumen for a certain
period of time to support or accelerate construction of export pipelines to the
Projects to assist in marketing and administration of BRIK.
Government staff reviewed the submissions and found:
There is interest from industry in using the Province’s BRIK volumes.
A number of international companies not currently operating in Alberta are
potentially interested in upgrading, refining, gasification or chemical
The Province’s value-added processing and potential revenue gains from
sharing in differential gain objectives have the potential to be achieved
through a BRIK policy.
Some of the bitumen processing descriptions
were relatively detailed and included volume requirements, products planned,
capital cost estimates, timelines and participation models. One of the
submissions was for production of gasoline and diesel in the first phase of the
project. Another had diesel, synthetic crude oil or SCO and diluent produced in
the first phase. another submission started with an SCO upgrader with a clearly
defined path to a world scale integrated upgrading, refining and petrochemical
complex. A common theme among these submissions was that processing capacity
would be allocated to the crown for processing crown bitumen through tolling
agreements, which shifts a significant portion of the risks of the project to
the government. Other processing proposals were relatively conventional, but
much less specific in terms of timing, volumes and participation models.
Submission suggested an opportunity for the
crown to participate in an open season to utilize a reversed line in Eastern
Canada to access the East Coast of Canada, the US East Coast, the US Gulf Coast
and Europe. Other submissions offered access to a pipeline and marketing
assistance in US Gulf Coast and East Coast markets. One of the submissions is a
request for the province to contract unspecified BRIK volumes for long term
capacity on a west coast pipeline. One submission asks that a certain volume of
the government’s bitumen royalty be committed for a period not longer than 5
years to a west coast pipeline. Finally, one submission proposes to fast track a
“west coast” solution through committing volumes to an Asian market and also
building an upgrader targeted at Asian markets.
Some of the bitumen processing
submissions proposed either new technology or unspecified technology in
combinations which are not commercially proven at this time. While technology
development is an important consideration, these proposals carried a higher
element of risk. One proposal was to process only upgrading byproducts, and must
necessarily be combined with upgrading by others to produce these
Marketing submissions were quite different in
their approach and in the services offered. One submission offered to provide
trading and central clearing platform services as a trading mechanism. A
different submission offered pipelines and marketing services to US Gulf Coast
markets as supplement and interim measures to building an Alberta Upgrader. On a
similar vein, another submission offered pipeline and marketing assistance to
address Asian markets, also in conjunction with an Alberta based upgrader. The
fourth submission was a full complement of trading services for both physical
bitumen and bitumen contracts.
The submission offering management
services proposed to provide professional services relating to evaluation of the
responses to the REOI, to evaluation of responses to a subsequent Request for
Proposals (RFP), BRIK allocation, disposition and commercial activities. The
submission claimed expertise in Program and Project Management, Opportunity
Visualization, Economic Analysis and Evaluation, Technical and Environmental
Analysis, and Implementation functions.