June 22nd, 2018

$1B committed to refining boost

By Collin Gallant on March 13, 2018.

The Methanex plant in Medicine Hat is seen in this 2013 file photo. The province has committed $1B to boost refining capacity in Alberta, a move which could help sway Methanex in the company's decision about potentially twinning the local facility.


Four days after outlining support for petrochemical plant construction in the legislature, Energy Minister Margaret McCuaig-Boyd says $1 billion will be available over four years to boost refining capacity in the province.

Half that amount involves a second round of royalty credits awarded to new facilities like one proposed in Medicine Hat.

“We need a real plan to get off the boom-bust rollercoaster economy that we’ve been on for most of my life,” McCuaig-Boyd told a press conference in Edmonton.

“Adding more value to our raw products at home means more jobs for Albertans and getting top dollar for our resources.”

Measures announced Monday also include $500 million in loan guarantees and grants to increase the amount of ethane and other petroleum building blocks to supply plants.

A royalty credit program in 2016 led to two projects that transform propane into plastic. It also included a call for methane-based production — such as methanol or fertilizer — and the new regime also includes ethane.

Government officials estimate refining adds up to six times the value of natural gas, which is abundant in Alberta but extremely cheap.

Methanex, which produces 600,000 tonnes of methanol per year at its existing Medicine Hat facility, has signalled it is studying twinning its plant at a cost of C$1.3 billion.

However, it has been five years since the proposal was first made public, and the company is now deciding between potential expansion here and in Louisiana.

The company has said a variety of factors are being weighed in plant location, and no major capital spending decisions will be made until later next year.

However, the company vied during the first round of the program, and has signalled renewed interest.

The program’s announcement was welcomed at Medicine Hat city hall Monday.

“Let’s do it,” said Coun. Jim Turner, who sits on several economic development boards. “Anything we can do to diversify the economy should be looked at.”

Mayor Ted Clugston said the city was active during the last program, and would likely make the local case again.

“I’m happy to hear about it and I hope it’s not political and that the best proposal wins,” said Clugston.

“Diversification, I have to agree with the province on it. Especially with natural gas, there’s an abundance of it and (you have to) try to do something with it.”

McCuaig-Boyd said Alberta has captured a small fraction of total sector investment across the continent, but “Bill 1 will help us realize a more diverse energy economy. ”

Officials believe the program could attract C$6 billion in new construction, leading to 4,000 construction jobs and 200 full-time operations jobs afterwards.

The Chemistry Industry Association of Canada CEO Bob Masterson notes that 300 recent major projects in North America involved C$275 billion in capital investment.

Considering the relative size of the U.S. economy, Canada should have received about 30 projects, but instead was the site of only three.

He said the programs are an “incredibly courageous move on the part of the Alberta government.

“We believe that governments at all levels in Canada need to work with industry to compete for new chemistry sector investments,” he said.

The first round will see $500 million in royalty credits paid by 2024 to plant operations of Pembina Pipelines and Inter Pipelines, which began work on a C$3-billion plant near Edmonton in December.

Interpipeline vice president David Chappell said increased tax income during construction alone would pay for the projects that would also increase government revenue and profits in the oilpatch.

“They get more (tax revenue) than they’ll pay out before they pay out a penny,” said Chappell. “That’s a good investment.”

The new round adds ethane as a key material that will be considered.

An ethane catalytic cracker would require an estimated $6 billion investment and could require more straddle plants on major pipelines or new lines required for huge liquid natural gas volumes coming onstream in northern Alberta.

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