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|What’s Next for Alberta Oil?

What’s Next for Alberta Oil?

In my last blog, I looked at the obstacles facing the Alberta oil industry and blocking new investment and new oil industry jobs for building trades workers. Today I want to start looking at some reasons for optimism.

Many of the obstacles that have created Alberta’s problem with shut-in oil are fixable if the political will and appropriate legislation and regulatory framework are in place. Here is where we are at.

Alberta oil advantages

We sometimes forget the substantial advantages the Alberta oil industry already possesses.

  • Alberta has enormous reserves of heavy crude oil, some 165.4 billion barrels of proven oil sands reserves.
  • Alberta has much of the infrastructure needed to extract crude oil and get it to market.
  • Alberta has a large, skilled workforce, including our own building trades members.

As we know, our problems are that Alberta lacks

  • the pipeline capacity for the crude oil it is already producing, let alone the additional potential production
  • sufficient upgrading facilities to process the crude oil into other marketable products.

Climate change and the fate of the carbon tax are the other major obstacles. Watch for a later blog on these topics.

Strong demand for crude oil

Most economists believe that global energy demand will increase through 2040 and that oil demand will be fairly strong for at least the next 15 years.

Bitumen makes up some 80% of Alberta’s oil reserves. Compared to conventional oil, heavy crude can be processed to produce more distillates, including many high value products like jet fuel and bunker fuel. Some experts predict the market for these distillates will continue to grow – as will prices.

Alberta’s crude oil export capacity will increase

In spite of the tortured approval process and interminable delays, Alberta should soon have greater pipeline capacity to move its crude oil to market. Learn more about BTA’s campaign for pipeline projects.

  • Enbridge’s Line 3 project will increase capacity from 370,000 barrels per day to 760,000 barrels.
  • Keystone XL can pipe 830,000-barrels-per-day.
  • The Trans Mountain Pipeline Expansion Project (TMX) has coast-to-coast public support for its construction, including in BC. TMX will almost triple the current capacity to 590,000 barrels per day. Learn more about BTA’s support for TMX.

In the meantime, Premier Kenney’s government may continue to support moving crude oil by rail car even if it modifies the rail car agreement negotiated by the Notley government.

New oil sands ventures

Most economists agree that new mega oil sands projects like Syncrude are unlikely in the future. Since the collapse of oil prices in 2014, oil sands ventures have been smaller and have required less total investment. Imperial’s Aspen oilsands project north of Fort McMurray has a maximum output of 75,000 barrels/day. Canadian Natural Resources Ltd. Kirby North has a maximum output of 40,000 barrels/day. Teck Resources oil sands Frontier Project is moving through the environmental review process. Teck presented at our last provincial conference.

Smaller projects are still moving forward.

Economic diversification based on crude oil

For decades, diversification based on the processing of crude oil to create higher value products has been the dream scenario for Alberta’s economy. Some new ventures that can help to diversify Alberta’s economy have been approved or are seeking approval.

  • Calgary’s Value Creation Inc. recently announced a $2 billion upgrading project that will reduce the thickness of oil being piped and increase the volume that can be piped.
  • CN announced a pilot project (CanaPux) to create bitumen pucks that can be moved safely by rail.
  • The joint venture between Pembina Pipeline Corporation and Kuwait’s Petrochemical Industries Company K.S.C. (PIC) has announced a new $4.5-billion polypropylene complex (PDH/PP Facility) in Sturgeon County, Alberta. BTA partner contractors are currently bidding on this work.
  • Inter Pipeline’s Heartland Petrochemical Complex will convert low-cost propane into 525,000 tonnes per year of polypropylene.
  • Once completed, North West Refining’s Sturgeon Refinery will refine bitumen to produce low-carbon, ultra-low sulphur diesel, and diluent. The refinery includes capture of CO2 process emissions. The CEO of North West Refining presented at our last provincial conference.

In a recent Financial post article, staunch conservative Ted Morton, a former Alberta finance minister under Ed Stelmach, notes that the Lougheed Alberta government spearheaded some successful diversification efforts: Syncrude Canada Ltd., Alberta Energy (Encana), and the Bank of Alberta (Canadian Western Bank). Based on those successes, Morton believes 4 conditions are necessary to successful diversification ventures: “they don’t introduce government competition to existing industries; they are viable without long-term subsidization; they are connected to a local advantage such as access to raw materials; and they use labour skills that already exist in the province.” The Notley government’s diversification strategy met those 4 criteria. Perhaps the Kenney government will see the value of this approach.

In my next blog, I will discuss ways the BTA, our affiliated Locals, and our members help grow job opportunities for building trades workers.

About the Author:

Terry Parker
Prior to serving as the Executive Director of the BTA, Terry was the Executive Director of the Saskatchewan Building Trades Council for twelve years. Terry worked as a glazier and before becoming the ED for SBTC, he worked as a Business Agent for the International Union of Painters and Allied Trades. His extensive time in leadership roles has given him a wealth of experience in the unionized construction and maintenance industries.

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