Canada’s natural gas drives hope of petrochemical boom

winnipeg — Canada’s gas-rich province of Alberta is looking to recreate the building boom spreading along the US Gulf Coast, where inexpensive natural gas generated billions of dollars in investment by petrochemical companies.

The adoption by drillers of fracking technology to unlock oil and gas from shale rock expanded US production dramatically starting a decade ago. That abundance has generated $194 billion since 2010 in announced capital investment to build or expand US chemical plants that use gas to make plastics, fertiliser and fuel, according to the American Chemistry Council.

Alberta hopes to do the same thing, turning prices that are about one-third those at the US Gulf Coast into a competitive advantage to attract petrochemical companies. Such investment would provide a badly needed market for oil and gas within the landlocked province, where energy companies struggle to reach buyers farther away.

Alberta in 2016 launched incentives to diversify its oil-based economy. Two projects, including Inter Pipeline Ltd’s planned C$3.5 billion ($2.7 billion) petrochemical plant near Edmonton, have been approved to share C$500 million in royalty credits.

Alberta solicited bids for a second subsidy round in June.

“They’re getting all kinds of expressions of interests,” David Podruzny, vice-president of business and economics at the Chemical Industry Association of Canada, said in an interview.

As attractive as cheap gas is, skeptics say Alberta’s incentives fall short of those in the US Gulf, and the province also has the disadvantages of higher costs and inadequate infrastructure.

But companies are chasing opportunities even without government help. CF Industries Holdings Inc is boosting ammonia fertilizer production by 150,000 short tons annually at its Medicine Hat, Alberta, plant starting later this year. The lower cost allows it to ship farther than usual, to farmers in the corn-growing US state of Iowa.

“At times it’s free,” said Bert Frost, CF’s senior vice-president of sales, of Alberta’s gas. “We have the lowest-cost gas in the world today.”