Alberta budgets $1 billion to diversify energy sector
NDP hopes to finance upgraders, ease bitumen bottlenecks
The province plans to spend up to $1 billion over the next eight years for new partial upgrading facilities in Alberta to diversify the energy sector.
The money will likely come in the form of $800 million in loan guarantees and $200 million in grants.
The government hopes it will attract as many as five new upgrading facilities, representing $5 billion in private investment and 4,000 construction jobs.
There’s no word yet on exactly which companies can apply, or how. Premier Rachel Notley said Monday those details will be hashed out over the coming months, but it’s likely smaller projects will get grants to support technological innovation.
Notley said the applications would undergo “extremely rigorous” vetting to ensure taxpayer dollars are protected.
“It’s not going to be a free-for-all,” she told a news conference at the Federal Building in Edmonton.
The goal is to have Alberta’s thick bitumen upgraded in the province so that more of it can flow through pipelines, leading to an increase in volume and sales.
It’s expected to free up 30 per cent of pipeline capacity at a time when bottlenecks are causing Alberta crude to sell at a steep discount on the North American market.
Petrochemical, LNG opportunities
The cash injection comes as a result of recommendations made by Alberta’s energy diversification advisory committee, released Monday.
The committee was formed after the 2016 royalty review. Its mandate was to figure out how to increase the value of Alberta’s resources and create more jobs — think opportunities around partial upgrading, refining, petrochemicals and chemicals manufacturing.
The committee found Alberta must be prepared for an increasingly volatile energy market as the world transitions away from fossil fuels.
“The Alberta oil and gas industry has entered a period that will be characterized by significant uncertainty and threats, but there will be opportunities,” the committee wrote.
The bright side is Alberta is wellpositioned to exploit those opportunities, thanks to our abundant oil and gas feedstocks.
The committee said Alberta can compete with jurisdictions like Saudi Arabia and the U.S. when it comes to running upgrading plants, but the capital costs run up to 15 per cent higher in Alberta, which makes it difficult to compete when other regions offer heavy subsidies and incentives.
“This disparity is the single most important obstacle holding back further expansion,” said the report.
The committee also pointed to opportunities for Alberta to export liquefied natural gas to the Asian market. Alberta will have to play nicely with B.C. to make West Coast LNG a priority — a tough prospect with the current loggerheads between the two provinces.
The Alberta oilandgas industry has entered a period that will be characterized by significant uncertainty and threats, but there will be opportunities.