04/16/2013 12:54 EDT | Updated 06/16/2013 05:12 EDT

Alberta Oil And Gas: Provincial Processing Should Be A Priority, Say Municipalities, Energy Firms


EDMONTON - Alberta could create thousands of new jobs and take in an extra $600 million in annual revenue if more oil and natural gas were processed in the province instead of being shipped raw to other jurisdictions, says a newly released report.

The paper by a University of Calgary economist was commissioned by municipalities and energy companies in the Edmonton region known as Alberta's Industrial Heartland Association.

The association said it plans to lobby the Alberta government for new and expanded policies that would allow for more value-added processing of oilsands bitumen, natural gas liquids and raw natural gas.

"It would add $6 billion annually to Alberta's gross domestic product," Linda Osinchuk, the association's chairwoman, said Tuesday. "It is amazingly huge."

Companies that are members of the association include fertilizer giant Agrium (TSX:AGU), Enhance Energy, Nova Chemicals (TSX:NCX), Williams Energy and North West Redwater Partnership — a joint venture bitumen refinery project that involves North West Upgrading Inc. (TSX:NWU) and Canadian Natural Resources Ltd. (TSX:CNQ).

The association said it supports Alberta's efforts to get better pipeline access to world markets, but suggests processing closer to home would help diversify the economy and help guard against the ups and downs of energy prices.

"By turning our raw materials into value-added products we can be less reliant on gaining access to outside markets," said Ian MacGregor, chairman of North West Upgrading.

"We still want and need to ship raw materials, but we can be creating products for local, regional and national markets."

The association estimates Alberta companies produce about $13.5 billion worth of chemicals and chemical products a year.

The report by economist Ron Schlenker looked at potential petrochemical and hydrocarbon processing investment in Alberta and analyzed how that would affect the economy.

Potential projects included methanol, urea fertilizer and polyethylene processing plants, as well as ethane cracking and bitumen facilities.

Schlenker estimates such projects would create up to 18,000 new jobs that would pay $1.8 billion in salaries.

Some of the changes the group says it wants is for better ethane extraction to ensure there is enough feedstock for the petrochemical industry.

Companies that process oil and natural gas also want quicker, more streamlined environmental reviews of projects.

"The rules that we are actually asking the province to open up is having the regulatory process shortened, so that when industry comes to the table they don't have to go through a lengthy multi-year, multi-departmental process," said Osinchuk, who is also mayor of Strathcona County, an area east of Edmonton that includes numerous petrochemical, chemical, oil and natural gas plants.

The province already has policies to support some value-added projects involving bitumen and says about 60 per cent of oilsands output is processed in Alberta.

Last December, the province passed legislation to create a single regulator for oil, natural gas, oilsands and coal extraction projects and plans to have that in place by the summer.

Energy Minister Ken Hughes said the government will do what it can to bolster more value-adding activities.

The province will also look at speeding up the regulatory system for oil, gas and chemical processors, he added, but any changes must wait until the new regulator is up and running.

"We will look at any specific proposals that any companies have that want to engage the province on adding value in Alberta," Hughes said.

"We are just in the process of creating the single regulator for the upstream side of the industry. That is taking a lot of energy and focus. I would like to get that in place and moving forward before we look at the downstream side of things."

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