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Husky Energy

Husky Energy, founded in 1938 by Glenn Nielson, has been involved in the Saskatchewan oil industry since the beginning of commercial production in the Lloydminster area in the 1940s. A refinery in Wyoming was disassembled and moved in 1946-47 to Lloydminster; since then, Husky has focused on the production and processing of heavy oil into products such as lubricants, bunker fuel, and asphalt. Heavy oil production in Saskatchewan has been challenged to find suitable markets for production. Heavy oil trades at a significant price discount to light oil, and only a limited number of refineries have the capability of processing heavy oil. In addition, heavy oil must be mixed with a diluent to ship through pipelines, making it more costly to transport. One solution to this problem, offered by Husky, was to upgrade heavy oil into a synthetic light crude through carbon removal, coking and/or hydrogen addition from natural gas. After many years of discussion, Husky Energy entered into a joint venture with the Alberta, Saskatchewan and Canadian governments to build a heavy oil upgrader. The Bi-Provincial Upgrader in Lloydminster began operations in 1992, becoming the second heavy oil upgrader in western Canada after the NewGrade Upgrader in Regina, operated by Federated Co-operatives. Similar facilities exist in the oilsands near Fort McMurray (Alberta) to create synthetic light oil from mined bitumen (a super-heavy oil). The Bi-Provincial Upgrader, built with the provision that it would source heavy oil equally from both Saskatchewan and Alberta, had an initial design capacity of nearly 55,000 barrels/day but has expanded its capability through investments in process improvements to be currently able to process 77,000 barrels/day of heavy oil and refinery tops.

In January 2000, Husky Oil brought on-line a large co-generation project, the Meridian Co-generation plant, with a capacity of 210 megawatts to supply electricity to Saskatchewan through a long-term contract with SaskPower. The co-generation plant operates in conjunction with the Bi-Provincial Upgrader. As with the NewGrade Upgrader in Regina, the Bi-Provincial Upgrader at Lloydminster faced a number of periods in the early 1990s when the price differential between heavy oil and synthetic light crude was too low to cover the costs of processing heavy oil into light synthetic crude. After encountering a series of operating losses, in 1994 the Alberta and Canadian governments wrote off their investments in the Upgrader and transferred equity to Husky and the Saskatchewan government, in return for modest buy-out payments, an end to liability for future losses, and provision for a specific claim on future profits. In 1998, with improved operating margins, the Saskatchewan government sold its interest in the Upgrader to Husky Oil and recovered its investments. Husky has announced an intention to expand the Upgrader in the next ten years to increase its processing capacity to 150,000 barrels/day.

David Hanly

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