A new government incentive program could lead to multi-billion dollar investments and thousands of jobs for the Edmonton region in the near future.
Following the release of its much-anticipated royalty review, the province introduced on Monday a $500-million incentive program it hopes will spur the development of value-added petrochemical facilities.
The program would allow petrochemical companies that use methane or propane to produce the materials for products that include plastics, detergents and textiles to apply for royalty credits, which they can then trade or sell to oil or natural gas producers to use against royalty payments to the province.
Despite its abundant supply of methane and propane, Alberta has been missing out on petrochemical opportunities because of high construction costs and greater distance to markets. The program is intended to bring Alberta in line with its biggest competitors – Louisiana and Texas, which offer competitive incentive programs to companies considering investment in their jurisdictions.
Over the past two years, the Alberta’s Industrial Heartland Association has been approached by more than a dozen North American and international companies looking to invest in these markets, but only one, Williams Energy, has publicly announced its intention of building a propane dehydrogenation (PDH) project.
The $2.5-billion facility is slated to be operational by the end of 2018 and will be the first of its kind in Canada.
“We’ve been dealing with a number of companies over the last couple of years that were looking at investments in the area. We’ve been really close, but second doesn’t count in the investment world,” said Neil Shelly, executive director of Alberta’s Industrial Heartland Association.
Shelly is confident the program will result in multi-billion dollar investments in the region. He anticipates the construction of two, possibly three, major projects in the area that encompasses Fort Saskatchewan and the counties of Lamont, Strathcona and Sturgeon.
The association has been lobbying for value-added processing for years, including during the recent royalty review process undertaken by the NDP government. A recommendation was included in the review released Friday, but without much detail.
Shelly was pleased to see the government take swift action in this area.
“We were encouraging the government to move very quickly. We didn’t think they’d move this quickly,” he said.
Each facility is expected to create 1,000 new jobs, as well as 3,000 construction jobs.
Given that many of the skilled trades needed to build, operate and maintain these new petrochemical facilities are almost directly transferable from the oil patch – from structural field workers to insulators to boilermakers to welders to pipefitters – the announcement will also help send Albertans back to work immediately.
It will also help counter out-migration of the workforce.
“We’ve done a good job in Alberta building up a good skilled trade workforce to build these (oil and gas) facilities. If the price of oil stays down too long we could lose a lot of those really good people, so this is also a good strategy to bridge the gap between now and when and if oil does recover,” said Shelly.
Applications for the program open on Thursday and close in early April. Credits will be awarded to the successful petrochemical companies once the facility is operational.
The government expects that shovels could be in the ground as soon as this year. Companies in the design and planning phase are eligible for the program.
