Victoria businessman David Black has taken a major step forward in fulfilling his dream of an oil refinery built on B.C.’s west coast after making a deal that could be worth billions of dollars with a major bank in China.
Black’s company, Kitimat Clean, signed a memorandum of understanding Thursday with the Industrial and Commercial Bank of China.
The deal will see the bank act as both financial adviser to the $25-billion project and provide financing for the refinery, pipelines and other elements of the project, which Black said could be in service by 2020.
“They see their role first as providing a fair amount of money themselves but also organizing the club of banks that will provide all of the debt money,” said Black, who was contacted in Beijing.
“It’s the biggest bank in the world, so they have the money, but they like to spread [risk] around like insurance companies.”
Black, who owns about 150 newspapers in Western Canada and the U.S., has floated the idea of building a refinery in northwest B.C. — the first new refinery to be built in Canada since 1986 — to handle 550,000 barrels of oil a day.
Black said the $25-billion price tag would cover $16 billion for a refinery, $6 billion for a bitumen pipeline from Alberta and a $2-billion natural gas pipeline to fuel the refinery. It may also include $1 billion for tankers to transport refined fuels to buyers in Asia.
Industrial and Commercial Bank officials said in a statement that they are “very pleased to be working toward a comprehensive agreement to finance a refinery in Canada, which is planning to export refined fuels to China and other Asian countries in the future.”
The amount of the bank’s cash investment was not disclosed; Black said “they will take a big chunk of it.”
Black has said the entire project would be debt-financed, rather than investors taking a stake in the assets. He said this deal maintains that plan.
“I’ve always said they [China] are the obvious buyer for the oil and fuel, and they have agreed they will not ask for control of any parts of the businesses,” Black said. “That includes the refinery, a marine terminal, a pipeline, possibly, and a tanker fleet. They aren’t asking for control of anything.”
Even if fabrication of the refinery’s components is done in China, there will still be 6,000 construction jobs created in B.C. over five years and another 3,000 permanent jobs, he said.
Black said the bank deal is the most important step in making the refinery a reality.
“The two most important things for this, of course, are finding the money and getting an agreement to buy fuel from the refinery,” he said.
“They are somewhat tied together. The bank is also talking to Sinopec [China Petroleum and Chemical Corp.] and PetroChina,” Black said, adding he has talked to Sinopec about buying refined product and has a meeting Monday with PetroChina to gauge its interest.
Black said the financing agreement adds to the credibility of the project in Canada.
“A lot of other people didn’t think China would want our refined fuel or didn’t think it would raise money for a new refinery. Well, I’m sure this certainly helps convince those folks.”