InterviewAlberta touts petchem advantage despite US shale boom

22 April 2011 17:48  [Source: ICIS news]

By Stefan Baumgarten

TORONTO (ICIS)--The government of Canada’s Alberta province remains confident of its petrochemicals industry's prospects, despite the US shale gas boom which has triggered a wave of new chemical plants across the border.

“We still expect the ‘Alberta Advantage’ to continue,” said Tim Markle, a spokesman for the province's energy ministry, Alberta Energy.

“We have ‘steel in the ground’ with four world-class crackers in the province,” Markle said.

Alberta also has the pipeline and transportation infrastructure, which make it a hub for natural gas and natural gas liquids (NGLs) - including the potential for gas from the neighbouring British Columbia province and for gas from Canada’s MacKenzie Valley and Alaska, he said.

Meanwhile, the provincial government is “cautiously optimistic” about opportunities from shale gas in western Canada.

“While we are aware that the amount and composition of shale gas is still being determined, we are hopeful that it will be good news for Alberta’s petrochemicals industry,” Markle said.

Alberta’s ethane extraction plants are running at only about 75% of capacity on average, partly because of the continuing growth of supply of low-cost shale gas in the US  In addition, the Alberta Sedimentary Basin has become mature, Markle said. Maturation means natural gas is more difficult and costly to remove from the ground.

In order to boost the province’s ethane production, the government launched the Incremental Ethane Extraction Policy (IEEP) in 2007.

The programme recently was extended to ethane from olefins-rich off-gases generated in the upgrading of oil sands and bitumen in Alberta.

The programme’s goal is to bring an additional 65,000-80,000 bbl/day of ethane. 

“The IEEP is a royalty credit programme where fractionation credits are provided for up to 60 consecutive months to petrochemical companies consuming new incremental ethane for value-added upgrading in Alberta, such as ethylene and derivatives,” Markle said.

“This incremental ethane is ethane that is not being produced at the time of application [under the IEEP],” he said.

The fractionation credits are intended to help address the tight supply and higher cost of new sources of ethane, to fill existing ethane capacity and to encourage value-added upgrading in Alberta, Markle said.

The programme also seeks to encourage new investment in ethane extraction facilities and to attract new investment in ethylene derivative plants in Alberta.

Markle described the IEEP as a “strategic use” of the government’s royalties from oil and gas to ensure that Albertans receive a fair return for the development of their resources.

At the same time, the programme provides investors with a stable and predictable environment, he said.

There are two projects which have come online as a result of the IEEP. 

“Further, we have two more projects approved but not yet operational,” Markle said. He did not disclose the names of the companies involved.

Last month, Canada’s NOVA Chemicals sealed a feedstock supply agreement  for a mix of ethane and ethylene to be extracted from off-gas produced by an Alberta-based oil sands upgrader.

NOVA said the IEEP was crucial in the deal. The Alberta programme would provide $5 (€3.45) in incentives for every barrel of feedstock produced.

Alberta’s petrochemicals industry also could benefit, to some extent, from the shale gas boom in North Dakota, Markle said. NOVA recently agreed a supply deal for ethane from North Dakota.

Major petrochemicals firms with production in Alberta include NOVA, Dow Chemical, Shell and MEGlobal.

For more on NOVA Chemicals and other producers visit ICIS company intelligence

By: Stefan Baumgarten
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