Declining natural gas prices could make the Alberta Industrial Heartland even more important to the province’s economic success.
Neil Shelly, executive director of the Alberta Industrial Heartland, brought that message to a roomful of business leaders and local politicians at a Sturgeon County business breakfast last week.
Shelly said the discovery of large deposits of shale gas in the United States has dramatically lowered natural gas prices and will likely keep them there for some time.
“The way it is looking right now, we know for sure that the United States is producing a whole bunch of gas and it is expecting to continue increasing for the next 25 years.”
Shelly said natural gas prices have always been a huge factor in employment and a major source of government revenues, but unless demand increases considerably, those windfalls could be history.
“It is going to be a little bit of tough sledding for the natural gas industry in Alberta. At a minimum, this guarantees we are not going to see a return to the windfall days.”
Shelly said the good news for the heartland is natural gas is often used in upgraders, meaning lower prices are good for that industry.
The lower prices could also allow industries to get into different types of refining previously considered too expensive.
With heavy oil becoming more important for Alberta, it is important the government make sure that oil also gets upgraded here, Shelly told the crowd.
The Alberta government wants to have about two-thirds of the oil upgraded here, a target they are meeting but that could change.
“We are going to be in a position, by about 2022 where we are only going to be upgrading about 40 per cent here, which is a huge economic opportunity that we feel would be lost.”
In his presentation, Shelly showed that 600,000 barrels per day of upgrading done in Alberta is worth hundreds of millions in federal and provincial taxes.
Shelly said the heartland association is working with the government on ways to encourage upgrading. The group is happy with the bitumen royalty in-kind program the province has started to use.
He said there is no one magic solution to the issues facing the industry so they are working with the government on a range of possibilities.
“It might be a whole toolbox of options that will work differently with different companies.”