Scotford Refinery Upgrade, Alberta, Canada

In December 1999, Shell Canada Ltd., the country's No. 3 integrated oil company, announced the upgrading of its Scotford crude oil refinery facility as well as the construction of a new upgrader next to it. Calgary based Shell Canada is 78% owned by Anglo-Dutch oil giant Royal Dutch/Shell.

The Scotford Upgrader will be constructed next to Shell Canada's Scotford Refinery near Fort Saskatchewan. The plant will use hydrogen addition technology to process the low viscosity crude oil (known as bitumen) from the Muskeg River Mine into a wide range of premium quality low sulphur synthetic crude oils. These synthetic crude oils could be sold to Shell's Scotford and Sarnia refineries, and Chevron's Salt Lake and Burnaby refineries. The balance will be sold to other refiners.

PLANT PRODUCTION AND COST

The new facility is being built at a cost of $2.1 billion, however the company also spent an additional $400 million in 2000 to modify its existing Scotford Refinery enabling it to use the new synthetic crude oils produced by the Scotford Upgrader.

The Corridor Pipeline will transport diluted bitumen from the Muskeg River Mine to the Scotford Upgrader, and connect the Upgrader with refinery and pipeline terminals in the Edmonton area. Corridor will also provide oil storage facilities for the project. Corridor is being built and will be operated by Trans Mountain Pipeline Company Ltd.

ATCO Power is building gas-fired cogeneration plants at both the Muskeg River Mine and Scotford Upgrader to provide steam and electricity. Additional electricity will be generated for Alberta Consumers.

Detailed engineering commenced in March 1999 and will be completed by the second quarter of 2002. Construction commenced in April 1999 and should be completed by fourth quarter 2002. Start up of the plant will start slightly earlier than this with the first synthetic oil being produced by the end of 2002.

PROCESS

Upgrading is the process of breaking large hydrocarbon molecules (such as bitumen) into smaller ones (such as upgraded crude oils) by increasing the hydrogen to carbon ratio. These upgraded crude oils are suitable feedstocks for refineries, which will process them into refined products like gasoline. Scotford's upgrading process will add hydrogen to the bitumen and break up the large hydrocarbon molecules - a process called hydrogen-addition or hydrogen-conversion.

ENVIRONMENTAL ADVANTAGES

The project has a number of environmental advantages:

• It will make the best use of the very clean bitumen produced at the Muskeg River Mine, with more than 100 barrels of upgraded crude produced for every 100 barrels of bitumen processed.
• It will produce dramatically lower levels of sulphur dioxide emissions.
• High carbon coke will not be produced as a by-product of production.
• The synthetic crude oil produced will enable refiners to produce very clean, high quality refined products, such as gasoline and diesel fuel, with low levels of aromatics, particulates and sulphur.
• The synthetic crude produced will replace declining crude oil production and reduce dependence on imports.
• The Upgrader will use electricity and steam produced from the high efficiency Scotford gas-fired cogeneration plant.

SOCIAL AND ECONOMIC ADVANTAGES

Design and construction of the new facility will create thousands of jobs with a peak on-site construction work force of 3,500. Furthermore approximately 200 permanent highly skilled positions will be created when operations begin in 2002.

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