Alberta chooses two petrochemical plants for $500M in royalty credits
December 5, 2016
By Dan Healing The Canadian Press
Dec. 5, 2016 – The Alberta government has selected two petrochemical projects to be eligible for $500 million in royalty credits in its efforts to diversify its struggling, oil-dependent economy.
Pembina Pipeline and Inter Pipeline both said Monday they were pleased to be chosen for the economic diversification program, which was unveiled by the government in February.
Construction of the facilities, planned for an industrial area north of Edmonton, will depend on final investment decisions and securing regulatory and environmental approvals, the Calgary-based companies said.
The projects would convert propane into material used mainly in the manufacturing of plastic products such as automobile parts, containers and Canadian banknotes, Energy Minister Marg McCuaig-Boyd.
The government said it hasn’t decided whether it will continue offering the diversification program credits, which have been fully allocated, but it said it will try to build on interest it has generated. In June, it said 16 applications had been made for the credits representing more than $20 billion in potential investments.
Pembina can receive up to $300 million in royalty credits for its proposed integrated propylene and polypropylene facility, expected to create 150 permanent jobs.
In April, the company announced a joint feasibility study on the project with partner Petrochemical Industries Company, a subsidiary of Kuwait Petroleum. The facility, estimated to cost between $3.8 billion and $4.2 billion, could convert 35,000 barrels per day of propane into 800,000 tonnes per year of polypropylene, Pembina said.
Inter Pipeline may receive up to $200 million in credits for its proposed $1.85-billion propylene facility, a project it inherited when it bought Williams Canada in September. It is expected to create about 95 permanent jobs.
CEO Christian Bayle said in a statement the provincial incentives are “meaningful” and added that Inter Pipeline is considering spending an additional $1.3 billion to add a polypropylene facility, with decisions on both plants to be made by the middle of next year.
The royalty credits, to be paid out after the facilities are operating, can’t be used directly by the petrochemical facilities but they can be sold to oil or natural gas producers to reduce their royalty payments.
In a note to investors, RBC Dominion Securities analyst Robert Kwan said the credits will enhance the economic case for the projects and make it more likely one or both will go forward.
Pembina and Inter Pipeline said both facilities could potentially be operational in 2021.
- Encoder Products introduces 25SP Accu-CoderPro shaft encoder
- Bosch Rexroth EFC 3600 VFD boasts energy efficient process control