Real estate rush could become a stampede as $25B refinery wins big-time backing
BY WI/BIV STAFF
A wave of real estate investing in Kitimat could build into a tsunami this year as financing has been secured for the first oil refinery in Western Canada.
Last month a New York investment banker confirmed he has investors lined up to make B.C. press baron David Black's $16 billion oil refinery near Kitimat a reality.
All in the project would actually cost $25 billion, when pipelines - or railways - and new tankers are factored in.
The refinery would prove a boost to Enbridge Inc.'s plan for a $6 billion pipeline linking Kitimat with the Alberta oilsands, industry observers say.
Black hired Oppenheimer and Co. Inc. to arrange the project's financing. Richard Cooke, Oppenheimer's senior managing director for the Americas and Africa, said investors are lined up.
"We have arranged and we have the funding committed to do this whole project," Cooke said. "David talked about a commitment of $25 billion, and the people behind us - the consortium we put together - have acknowledged that they will support that total sum."
But in an effort to live up to the project's name - Kitimat Clean - Black said the project would include new cutting-edge technology to reduce greenhouse gas emissions, adding $2 billion to the project's costs.
In addition to the refinery itself, Black estimated the project would also require $9 billion in additional infrastructure:
• $6 billion crude-oil pipeline;
• $2 billion natural-gas pipeline; and
• $1 billion for new tankers.
If the Enbridge Northern Gateway pipeline is rejected, Black said bitumen from the Alberta oilsands could be brought to Kitimat by rail.
Even with the additional costs of the clean technology for the refinery, Black said it would still be more cost competitive with others around the world because, for one thing, it is located closer to emerging markets in Asia.
The discount on North American natural gas and oil would give the project an edge, he said. "We would be the lowest-cost producer by a mile."
Rentals, retail
Bruce Long of BCapartmentbuildings.com said the already competitive Kitimat real estate market will heat up with the refinery announcement. Long, who has sold four rental buildings in the city, said typical older apartment buildings sell for around $30,000 per door, but prices may be bid up. He noted investors have good reasons to consider Kitimat's potential.
There are concrete plans to build at least three LNG plants in Kitimat, with the first to open in 2015. As well, Rio-Tinto has 1,500 workers in town finishing a multimillion-dollar expansion. Kitimat is also the western terminus for the planned Enbridge pipeline.
"This is the land of opportunity," said Rose Klaus, head of Kitimat's economic development department, adding the opportunities don't end at housing. "We need every type of retail, hotels and more restaurants.
from Western Investor April 2013
