CALGARY (CP) -- Synenco Energy Inc. said Wednesday that it plans to build an upgrader north of Edmonton that will process oilsands bitumen from its proposed C$5.3-billion Northern Lights project.
Synenco said it will seek regulatory approval to build the upgrader in Sturgeon County, 40 kilometres northeast of Edmonton, as opposed to on-site at its oilsands leases about 100 km northeast of Fort McMurray.
Executive vice-president Bert Lang told analysts that while financial cost savings were hard to quantify, avoiding the extremely tight labour market of northern Alberta was important.
''It'll be far easier for us to retain personnel for the operation of the upgrader and also to get construction workers,'' Lang said.
''We're fairly close to pipelines for bitumen and synthetic crude oil, so there will be opportunities to also process third-party bitumen if we have over-capacity.''
Production from Canada's oilsands is expected to nearly triple over the next decade from its current one million barrels per day as a long line of multibillion dollar projects await construction.
In advance of extra capacity, energy companies are currently wrestling with the idea of how to transport and upgrade the bitumen into synthetic crude oil.
Oilsands analyst Steven Paget of Calgary-based FirstEnergy Capital said Synenco's strategy of building the upgrader closer to a major centre ''makes a lot of sense.''
''The road to Fort McMurray is a bottleneck and the people-issue is a bottleneck - whether building or operating.''
Paget said that bitumen is currently selling ''for a fraction of the cost'' of light oil, making the economic case for companies to build more upgrading capacity to handle their own bitumen.
''In the short-term, there's still a need for more upgrading - we're certainly not over-built.''
Synenco, which became a publicly-traded company on the Toronto Stock Exchange in November, holds a 60% stake in the Northern Lights oilsands project.
The other partner is SinoCanada Petroleum Corp., a wholly owned subsidiary of Sinopec Group, China's largest refiner as well as a major producer of oil and natural gas.
Sinopec bought its 40% stake in the Northern Lights project last May for $105 million - one of two minority investments by Chinese firms in relatively unknown junior oilsands companies this year.
Synenco president Todd Newton said the proposed complex would be built on 5,000 hectares of land zoned as heavy-industrial owned by the partnership north of the North Saskatchewan River.
The Northern Lights oilsands leases cover about 186 square kilometres northeast of Fort McMurray and hold an estimated 1.49 billion barrels of bitumen.
Presently, the Northern Lights project is estimated to cost C$5.3 billion and produce about 100,000 barrels per day of light synthetic crude in two stages. The first stage to produce 50,000 barrels daily is expected to be completed by late 2010, with the second stage coming on stream two years later.
On the Toronto stock market, Synenco shares [TSX:SYN] rose 10 cents to C$16.90.
(c) The Canadian Press 2005
