Junior energy company investing $90 million to rebuild idle Alberta oil refinery
A little-known, TSX-Venture listed company plans to tear down a refinery that has sat idle for 17 years and rebuild it as a re-refinery, making it the first used oil refinery in Canada.
Gen III Oil Corp. announced Wednesday that it had inked a 20-year lease with Calgary-based Parkland Fuel Corp. for land in Bowden, Alta. where Parkland owns an inactive oil refinery along the highway between Calgary and Edmonton.
The company plans to begin construction on its 2,800-barrels-per-day re-refinery this summer and commission the facility in the first quarter of 2019 – making it the first re-refinery on the Prairies and just the third in Canada after a facility in North Vancouver and another in Kitchener, Ont.
“We’re taking a waste product, what is chemical garbage, we’re taking that and re-refining it, cleaning it up,” Gen III president and CEO Greg Clarkes said, adding that used oil can be recycled six times. “What would otherwise go down the drain can be used again and again,” he said.
Gen III – whose market capitalization is just $43 million – says the project would cost $90 million, employ 445 people during construction and 25 people once the project is up and running.
Gen III also announced this week it had wrapped up a front-end engineering study with Stantec Inc., bringing it closer to construction. It’s now seeking bids from engineering, procurement and construction firms for the project.
The company believes being connected to the rail-loading facility and oil storage tanks that already exists at the Parkland facility in Bowden would shave off $35 million in costs to improve its economic viability.
Clarkes said Gen III is in conversations with major banks in the U.S. and Canada for some of the financing it needs, and the company also expects to raise money through equity issuances. Gen III was down 8.5 per cent by close on Wednesday.
He said he doesn’t expect financing will be a major issue for Gen III in part as the company also has a signed off-take agreement with a subsidiary of Parkland for 100 per cent of the re-refinery’s lubricants production for five years.
Parkland spokesperson Annie Cuerrier said the company will be working with Gen III to get all the permits to begin the project. “This is an attractive project for Parkland and the community of Bowden,” she said.
The Gen III project would be just the second refinery project in Canada in the last 30 years. The other new refinery in Canada is the exponentially more expensive $9.7-billion, 50,000-bpd Sturgeon refinery near Edmonton, which is expected to reach full capacity this summer.
“There’s a need for a plant on the Prairies,” Rockmount Financial Corp. president and CEO Russell Kalmacoff said. His Calgary-based firm had until recently been researching a re-refinery of its own.
Kalmacoff said there is currently 100 million litres of waste oil being produced in Canada every year, and another 20 million litres produced in Saskatchewan that are currently shipped to the facilities in B.C. and Ontario. “The proximity will given them an advantage [over those facilities],” he said.
Categorised in: Canadian News