Alberta Premier Rachel Notley speaks during a press conference on April 15, 2018. Notley says the decision to cut oil production seems to be working, but says it’s not a long-term solution. THE CANADIAN PRESS/Justin Tang
Medicine Hat News and Canadian Press
The Alberta government will more than double the amount of money it is putting towards spurring new petrochemical projects to be built in the province, but it is unclear if any in southeast Alberta are even in the running.
The Petrochemical Diversification Program offered $500 million in royalty credits to help plant owners greenlight new plants or expansions over the next several months.
That will be raised to $1.1 billion in the rapidly concluding second round of the program, Premier Rachel Notley announced on Tuesday, which could mean four multi-billion dollar projects could benefit.
Speaking to rural reeves and administrators on Tuesday at the group’s annual convention in Edmonton, Notley said that a major markdown on Alberta export oil exports required action beyond the ongoing effort to build pipeline capacity.
“We must take greater control of our resources,” she said in her address. “The time has come for us to dramatically increase energy upgrading here.”
Among efforts to “supercharge” the process is an immediate $600 million boost to the diversification program, which Notley said involves 23 potential projects worth a total investment of about $60 billion.
Offering $1.1 billion in royalty credits, which can be swapped to upstream petroleum producers to lower initial feedstock costs, could lead to projects totalling $20 billion.
They would create 15,000 construction jobs, 1,000 permanent jobs and “hundreds of millions” in new revenue for the province.
The current round was opened last spring by Alberta Energy at the same time it released its diversification strategy that lauded Medicine Hat as a potential petrochemical hub, along with Grande Prairie, Joffre (near Red Deer), and the Industrial Heartland cluster near Edmonton.
Local methanol producer Methanex took part in the first round of the grant in 2016, which saw two propane to plastic plants near Edmonton split the $500 million award.
Company officials, however, told the News this fall that timelines didn’t match its own capital expansion queue, which has a major project in Louisiana ahead of a six-year-old proposal to twin the Medicine Hat facility.
At the same time, though, Methanex vice-president Paul Daoust stated that the Medicine Hat project has strong advantages, but requires cost certainty and a favourable rail export contract to the Pacific Coast.
“Compared to other potential Alberta methanol projects, MH4 is best positioned to overcome these challenges,” he told the News.
“(It) will continue to be considered along with other growth opportunities globally and we will continue to work with the government to preserve the strength and competitiveness of our industry and to encourage the development of future investment attraction programs.”
Industry analysts in the upstream sector reacted to Notley’s comments, saying the news is welcome, but won’t help oil and gas producers receiving low commodity prices.
Volumes that would be needed to supply a petrochemical plant would be too low to make much difference in the glut of oil and gas that is hurting prices, said Tim McMillan, CEO of the Canadian Association of Petroleum Producers.
“On a volumes basis, it isn’t particularly large when we’re looking to address our market access issues,” he said on Tuesday.
Any addition of demand in Alberta for natural gas is good news, said Gary Leach, who recently retired as president of the Explorers and Producers Association of Canada, noting Alberta faces tough competition in its traditional gas markets in the U.S. and Eastern Canada.
But he agreed the program doesn’t help with oil price issues, which he blames on “government policy failures in Canada” that have stalled needed export pipeline projects.
In the first round of the program in 2016, the government selected Pembina Pipeline and Inter Pipeline to be eligible for $500 million in credits.
Inter Pipeline is going ahead with a $3.5-billion propane dehydrogenation and polypropylene project to produce plastic pellets and Pembina is contemplating building a similar facility for about $4 billion, with both sites located east of Edmonton.
Notley announced Monday she has appointed three experts to work with the energy industry to find ways to close the oil price gap that the government says is costing the Canadian economy $80 million every day, a move that McMillan applauded.
