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Alberta to invest $1B in eight years on bitumen upgrading projects

Loan guarantees and grants to attract from two to five partial oil upgrading facilities and $5 billion of private investment.

February 26, 2018   by CP STAFF

EDMONTON — Alberta is investing $1 billion in oil sands bitumen upgrading to get a bigger bang for the buck on its oil.

Premier Rachel Notley says the money will be used for loan guarantees and grants to attract anywhere from two to five partial oil upgrading facilities – resulting in $5 billion of private investment.

The project will begin in 2019 and last for eight years.

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.

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“Partial upgrading also increases the value of our bitumen,” Notley said. “It creates a higher value for the product that can be shipped to more refineries around the world.”

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.

The decision follows a recommendation from the government’s energy diversification advisory committee.

The committee reports that 82 per cent of the world’s energy comes from fossil fuels, but notes the global economy is shifting toward renewable sources, such as hydro, wind and solar.

It says that technology is revolutionizing the oil and gas sector in North America, particularly in U.S. shale oil and gas basins.

“In the span of just a decade, the United States has gone from being our biggest customer to our biggest competitor,” notes the report.

“While Alberta faces volatile and uncertain oil markets, global markets for petrochemical products are an opportunity that we cannot ignore,” said Jeanette Patell, co-chair of the committee.

“These markets show long-term, stable growth as they keep pace with rapidly expanding consumer economies in Asia.”

The committee said that Alberta can compete with jurisdictions like Saudi Arabia and the United States when it comes to running these 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.

Notley said the $1 billion will be roughly split four to one on loan guarantees versus grants, with most of the money rolling out over the next two to three years.

She said the criteria and the screening process will lessen the economic risk.

“We’ll be evaluating (the contracts) independently with great prudence and very transparently to ensure that we ultimately come up with the best deal for Albertans, for taxpayers, while ensuring that most of the risk stays in the private sector,” she said.

The plan is set against the backdrop of uncertainty over expanding pipeline access to get products to the B.C. coast and from there to foreign markets.

Last week, BC Premier John Horgan backed down on a promise to restrict additional oil shipments from Alberta for the Trans Mountain pipeline expansion while the province asks the courts for an opinion on whether it can protect its environment from potential spills.

The move caused Notley to lift a short-lived ban on BC wine. But Notley said she is still working with the federal government to make sure the Trans Mountain project, which has federal approval, goes forward.


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