Another View: The Kitimat Refinery project

Jim Shephard talks about David Black's refinery project

I first heard of this concept from David Black a number of years ago.

At the time I was skeptical of its chances. My initially negative attitude was based mainly on my experience of 10 years service on the board of directors of Imperial Oil. Since I was accustomed to the discussion of petroleum economics centered in Calgary, I saw no need for a refinery in Kitimat. That attitude was based on the fact that there had not been a new refinery built in North America in many years. And any needed increase in petroleum production was achieved by expansion of existing refineries throughout North America. But after my service with Imperial Oil, I went on to serve four years at Canfor which led to my nine visits to China in search of lumber markets.

My exposure to the phenomenal expansion of China’s economy opened my  eyes to the true merit of the Kitimat refinery concept. It made me realize that it would not be just another refinery relying on the North America market but rather a refinery that would supply the vast appetite of China for petroleum products. The challenge will be to draw the attention of Asian investors who would see the value to this investment. It appears that David Black, after many years of effort, is nearing an agreement that could provide the vast capital infusion needed to make this refinery initiative  a reality. The appetite for oil products  for all Asia will continue to grow and the Kitimat refinery is ideally situated to take advantage. Asian countries, especially China, are very interested in securing sustainable supply of resources that will flow freely without undue trade barriers like surprises with taxes, regulations or tariffs. Canada has a good reputation as a free trade country that can be relied on as a dependable source of

supply. Now is a very opportune time to attract the vast investment needed to make the Kitimat refinery go ahead. David Black, with his years of dilligence , deserves our appreciation  for displaying the foresight and courage to invest his time, money and reputation to help bring along this huge initiative .

The positive merits of the Kitimat  refinery are so profound that this project is really     beyond  any political persuasion . Any and all supporters of NDP, Liberal, Conservative  or even Green should see the tremendous benefits that would come to BC  with this project.

This initiative will involve the investment of many billions of dollars.

That’s for sure. It’s hard for any of us to visualize a million let alone a billion of any thing. So lets look at the “ on the ground” facts of such an undertaking for all of us in B.C.

Let’s start with the big picture. When it comes to the benefits of a petroleum cycle from well exploration to the gas station, the jurisdiction that hosts the refining process enjoys a huge portion of the value addition to the raw material. For the KFC Project that would mean several thousand mostly trade union jobs for the multi-year term of the construction  phase.

It would also mean the creation of over 3,000 permanent jobs for the operation and supply support of the refinery when running.

This refinery would be processing 175 million barrels per year which means the tax revenue that could go toward healthcare, education, vital services for the disabled and elderly would be immense.

But job creation and tax revenue is not the only desirable feature of  the KRC.

It also would provide much lower risk to the marine  environment. The shipments out of the refinery would be finished product like aviation fuel, gasoline and diesel These .products if ever spilt would be much less impactful  on the marine environment. They would also  be transported in smaller ships.

I know there are those on both sides of the political aisle that  address this as  a political issue. And I would disagree with both. This is a project that can be attractive to all political stripes. Trade unions would see a significant increase in jobs and memberships.  Hospitals and schools across the province would see an improvement in government funding. Business activity especially in the challenged north west BC would be very positively impacted. And those with a concern for the threat of marine spills would see a significantly reduced exposure for the environment.

Based on the huge positive impact this initiative could have on B.C., I think the question should not be if we want it….but rather, how can we help make sure that the petroleum world sees this as an attractive way to invest billions of shareholder capital.

 

 

Jim Shepard

Retired President of Finning and Canfor and a past Director of Imperial Oil.

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