$1B upgrader plan aimed at getting Alberta off boom-bust rollercoaster

The Alberta government will spend up to $1 billion on a series of grants and loan guarantees to build two to five partial oil upgraders in the province.

The government hopes the money will attract up to $5 billion in additional private investment and create 4,000 new construction jobs.

Premier Rachel Notley made the announcement Monday, following new recommendations from Alberta's Energy Diversification Advisory Committee.

The money is expected to start flowing from government coffers in 2019 and last for eight years, with the majority coming in the form of loan guarantees in the next two to three years.

"Primarily it would be sort of a four-to-one ratio between loan guarantees and grants, broadly speaking," Notley said.

Not getting 'full value' for oil

The plan is to upgrade Alberta's thick oilsands bitumen in the province before shipping it to those North American refineries which would otherwise reject Alberta bitumen, favouring lighter oil blends instead.

"We are blessed with a greater variety of natural resources than anywhere in the world, but right now we're not getting full value for them," Notley said Monday.

Unlike raw bitumen, the partially upgraded product does not require diluent to help it travel through pipelines.

The province says the move away from using diluent, which has to be shipped back from the refineries once the bitumen is upgraded, is also expected to free up 30 per cent more pipeline capacity at a time when bottlenecks are causing Alberta crude to sell at a steep discount on the North American market.

Alberta Federation of Labour president and committee co-chair Gil McGowan said partial upgrading will expand the customer base for Alberta bitumen and increase its market value by up to $10 to $15 per barrel.

'The first of several steps'

The investment in upgrading was just one of nine recommendations the committee announced Monday, after finalizing its energy diversification report for Alberta Energy Minister Margaret McCuaig-Boyd in the fall of 2017.

The energy minister called Monday's announcement "the first of several steps we are taking to secure Alberta's future and get off the boom-and-bust rollercoaster."

The committee also recommends Alberta work "closely with the B.C. and Canadian governments" to prioritize the shipment of liquefied natural gas from northwestern Alberta to the B.C. coast and on to markets in Asia.

The advice comes at a time when the Alberta and B.C. governments remain at odds over the planned expansion of the Trans Mountain pipeline across the two provinces.

When pressed on the likelihood that her government can find common ground with B.C. Premier John Horgan to increase shipments of natural gas to the coast when the two provinces are already at war over pipelines, Notley was cautiously optimistic.

"There might be some more little games being played between now and when that [Trans Mountain] pipeline gets done," she said, adding she would speak with Prime Minister Justin Trudeau about the issue on Tuesday.

"These are matters that are primarily driven by the federal government because they're interprovincial, and the fact of the matter is at some point in the future we may well be able to find some shared positive outcomes between B.C. and Alberta," Notley said.

Industry responds

Mark Plamondon, executive director of Alberta's Industrial Heartland Association, said the energy and petrochemical manufacturing centre is home to $40 billion in capital investment, with the potential to attract an additional $30 billion by 2030.

Still, that's a small drop in the growing bucket of energy investment globally.

"Traditionally, Canada has realized 10 per cent of overall investments in North America, but over the last five years our share has been less than two per cent," Plamondon said.

That's happening as powerhouse petrochemical manufacturing areas like the U.S. Gulf Coast are enjoying a huge influx of investment.

According to the committee report, the U.S. has seen $185 billion invested in its refining and petrochemical sectors over the past decade, while Alberta has secured just $4 billion.

Naushad Jamani, a senior vice-president with petrochemical manufacturer NOVA Chemicals, said Canada has been missing out on investment due to regulatory delays.

"We've seen this huge investment wave come through North America and we basically missed out on it. So the question is: What are we not doing that we should be doing?" Jamani said. "The state of Louisiana, the state of Texas, are so good at this."

Shortening regulatory timelines and clarifying the approval process for new energy and petrochemical projects is another recommendation from the committee, which specifically targeted Texas and Louisiana as competing jurisdictions.

The energy diversification advisory committee was set up on the advice of the royalty review advisory panel in 2015.

The committee is made up of industry professionals, labour representatives and Indigenous business leaders. Its mandate is "to explore opportunities for increasing the value of Alberta's resources and creating more jobs."