Alberta Seeks to Lure Petchem Projects with Oil & Gas Royalties Credits

Researched by Industrial Info Resources (Sugar Land, Texas)--The government of Alberta is hoping a new royalties incentive program for construction of petrochemical facilities will give a much-needed economic shot in the arm to the province, whose fortunes are closely tied to energy production.

The program will award up to C$500 million ($360 million) in oil and gas royalty credits to selected petrochemical facilities through a competitive application process. Such facilities do not directly benefit from royalty credits, as they do not pay royalties, but can trade or sell the credits to oil or natural gas producers.

The developers of the program hope to take advantage of the province's abundant supplies of propane and methane feedstock to help lure new petrochemical investments.

Alberta Minister of Economic Development and Trade Deron Bilous and other officials unveiled the program last week. Bilous said the province already has Canada's highest concentration of refiners and petrochemical manufacturers and thus a skilled workforce, but the region is challenged by high construction costs and its distance from end markets. Also, low oil and gas prices have taken a big toll on jobs in the region, officials noted.

Alberta competes with U.S. Gulf Coast states like Louisiana and Texas, which have long offered substantial incentives for petrochemical project development, Bilous said.

Alberta's petrochemicals industry currently employs nearly 8,000 workers and supports an additional 40,000 jobs. Aimed at diversifying the province's economy, the new program could lead to an additional 3,000 new jobs during the construction of new plants, as well as more than 1,000 jobs once operation begins, and attract between $3 billion and C$5 billion ($3.6 billion) worth of investment, according to the program's proponents.

Petrochemical industry pay scales in Alberta are competitive with those in places like Texas and Louisiana, he maintained. The incentives could lead to "shovels in the ground this year" for new petrochemical projects, Bilous said, adding, "Our government is taking action as opposed to sitting around and waiting for the price of oil to rebound."

The application period for the program began February 4 and closes April 8, Bilous said. Alberta's Ministry of Energy will evaluate the proposals and pick the winning applicants.

Brad Hartle, press secretary to the Minister of Energy, told Industrial Info that "We have had a number of companies express interest in this program and we will update the public once applications close in April."

Industrial Info is tracking more than $3.7 billion in petrochemical projects in Alberta, the largest being Williams Partners LP's (NYSE: WPZ) (Tulsa, Oklahoma) $1.3 billion propane dehydrogenation (PDH) plant in Fort Saskatchewan. The planned facility would produce 1.1 billion pounds per year of propylene, using 35,000 barrels per day of propane as feedstock. Fluor Corporation (NYSE:FLR) (Irving, Texas) is serving as the engineering and procurement (E&P) provider and UOP LLC (a subsidiary of Honeywell International (NYSE:HON) (Morris Township, New Jersey)) is the technology provider. The project is currently set for kickoff in second-quarter 2015, with completion in fourth-quarter 2019.

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