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Alberta Giving Economic Support to Domestic Petchem Development

The Alberta government recently posted a C$500 million (US$350 million) reward for natural gas producers to co-operate with additions to petrochemical complexes in the province.

The offer went out as Williams Cos. and Garardia Capital prepared plans for propylene, plastic pellets and heat-and-power cogeneration plants at Redwater, near the provincial capital of Edmonton, and while Nova Chemicals Corp. continued construction of a new polyethylene unit at its Joffre complex in central Alberta.

The announcement by the nine-month-old New Democratic Party administration put a total dollar figure on a renamed version of a bonus that the former Conservative regime offered under the title IEEP, short for incremental ethane extraction program.

As the PDP, short for petrochemicals diversification program, the renewal will continue to grant indirect help. The scheme provides for the government to donate credits against future provincial gas and byproducts royalties to petrochemical project sponsors.

The petrochemical companies turn the credits over to gas producers in exchange for raw material commitments. The arrangement is intended to enable negotiation of long supply contracts, potentially with built-in price discounts. Petrochemical projects will qualify for the aid by going through a competitive bid process, the government said.

The Conservative version of the assistance stipulated that petrochemical plant additions earn “fractionation credits” of C$1.80-5.00 (US$1.26-3.50) per barrel of ethane extracted from Alberta-produced gas that they use.

The announcement by NDP Economic Development Minister Deron Bilous did not disclose such details. But his statement said the government sees potential for two or three projects, costing C$3-$5 billion (US$2.1-3.5 billion) and creating more than 1,000 permanent plant operating jobs.

Using Alberta gas and oil for diversified value-added products, rather than exporting them as low-cost raw materials to more advanced industrial areas, has been a cornerstone of economic commitments by provincial political parties of all partisan stripes for generations.

A recent study by the Canadian Energy Research Institute reminded all concerned that the province’s remote location, high industrial costs and stiff competition in the United States mean that Alberta diversification requires boosts that global markets alone are unlikely to provide.

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