The Alberta government’s incentive program is working to lure petrochemical companies north of the 49th parallel, according to a natural resources research firm based in Houston, Texas.
Wood Mackenzie senior vice-president of chemicals, Stephen Zinger, says although Canada has higher capital startup expense costs and a carbon tax, in Alberta those are offset by the government’s recent petrochemical incentives.
Zinger outlined his findings in a recent report called Wanted: Chemicals Investment in Canada. Reward: $500 million.
Alberta’s program will provide up to $500 million in royalty credits to encourage companies to build manufacturing facilities that turn feedstocks into more valuable products like plastics, fabrics and fertilizers.
Despite Canada’s challenges — Alberta is a landlocked province, for instance, with gas stocks pretty much on par with the Gulf Coast — Zinger said the province presents a real opportunity for American investment.
“The economic incentives put it at more of a level paying field with the U.S.,” he said.
“It certainly has companies looking at both regions, rather than one, as they look to make their next set of petrochemical investments.”
An investment shift
The gas-based petrochemicals scene was all but closing shop a decade ago, unable to compete with the oil side of the market, but Zinger says supply of natural gas far exceeding demand has led to a complete 180.
And while he thinks petrochemical plants would likely set up shop in Alberta over the next 10 to 15 years regardless, he said the current government program has unquestionably given the industry a boost.
“The incentives will help advance investments sooner than if they were left on their own,” he said.
Next round of cash announced early 2019
Applications for Round 2 of Alberta’s incentive program close Oct. 1.
Energy Minister Margaret McCuaig-Boyd said she’s not surprised by the American focus in the program, telling Postmedia she has seen interest from all over the globe.
“We’ve always known it’s a bit more expensive in Alberta with the upfront costs, but once (plants are) up and running we can go toe-to-toe with anybody, especially on the Gulf Coast,” she said.
“We’re going to pick the best projects that are in the best interests of Alberta, regardless of where they’re from.”