INSIGHT: Alberta has much to offer but needs ‘vision’

09 June 2009 23:11  [Source: ICIS news]

By Nigel Davis

KANANASKIS, Canada (ICIS news)--The volumes of chemical feedstocks that might be available for petrochemicals development in Alberta are significant.

And the industry could double in size in a relatively short period. But the conditions have to be right to facilitate the move from a C$13.5bn ($15.1bn) output industry to one much bigger.

Companies could take advantage of new feedstock streams, principally bitumen but also those associated with oil sand processing; from coal and possibly even from coke. Alberta has a 70m tonne mountain of high sulphur content and it is growing fast.

But the right conditions have to be in place to encourage investment in feedstock delivery systems; in the way government treats its bitumen royalties (it is developing a royalties in-kind scheme that could supply feedstock for a refinery and petrochemicals complex) and to support a more sustainable industrial footprint.

Alberta is hydrocarbon rich, of that there is no doubt. But the question is how the province develops its position as a producer energy, hydrocarbons and chemicals.

Petrochemicals feature in Alberta’s new energy strategy but there is no clear over-arching vision for the sector. That is a shame because players in the sector need to see feedstock opportunities being developed before they might be empted to participate in the industry’s future.

Currently Alberta produces 1.4m bbl/day of syncrude from the oil sands; 1.4m bbl/day of oil from bitumen, some 250,000 bbl/day of refined products and 154,000 tonnes of petrochemicals from the resource, according to the Alberta Department of Energy.

There is no doubt that the Canadian province wants to capitalise on its energy resources and push downstream but it wants to do so “wisely” - in other words, with the minimum of environmental impact - and to add value in the right way.

After 10 years of rapid growth, oil sands production is under the spotlight as never before, and is a lighting rod for environmental concern, according to some. That is an issue of concern that could yet stifle further petrochemical industry development.

The big question is how these hydrocarbon rich deposits are utilised as what some call a “sustainable” energy resource and in an environmentally responsible way. The fact that provincial politicians see adding value to the energy streams as a policy objective is good news for sector players.

The focus on environmental issues, however, puts further pressure on companies wanting to participate in future petrochemicals development to come up with robust, competitive business models.

Alberta wants to take an ‘eco-industrial’ cluster approach to developing the broader chemicals potential from the oil sands deposits. There are numerous feedstock streams but the ones apart from ethane (the availability of which is in decline) have either to be separated or are not easy to process. Some clever chemistry and some astute economics will be needed to see many plans through.

Alberta needs a vision for its petrochemicals sector and one that government and the majority of the province’s small population can buy into.

Companies in the province could become the “most efficient upgraders of energy into chemical products”.

These are the words of president and chief executive of Canada’s Chemical Producers Association (CCPA). To do so, however, a great many pieces of the energy jigsaw, political and otherwise, have to fall into place.

($1 = C$0.89)

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By: Nigel Davis
+44 20 8652 3214

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