WHEREAS Alberta is a global storehouse of energy assets, and energy development is the largest contributor to the provincial GDP (25.7%); an
WHEREAS the provincial energy industry is a nationally strategic sector, accounting for 25% of the value of the Toronto Stock Exchange; and
WHEREAS there is global market demand for Alberta’s energy resources and products; and
WHEREAS current projections show that the ratio of value added products to raw bitumen exports is declining as production ramps up; and
WHEREAS Alberta has a tremendous opportunity to sustain and stabilize its economy by strengthening and lengthening the energy value chain in the province; and
WHEREAS it is in everyone’s interest to expand Alberta’s energy sector value chain;
THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties urge the Alberta government to re-affirm its commitment to expand the energy value chain consistent with the Alberta Energy Strategy, Launching Alberta’s Energy Future; and
FURTHER BE IT RESOLVED that the Alberta government advocate for the concept of value creation from natural resources in Canada into any proposed Canadian energy policy framework; and
FURTHER BE IT RESOLVED that the Alberta government work with industry to address the potential constraint of labour shortages and cost competitiveness that might inhibit major value added projects and economic prosperity for its citizens.
Alberta is home to Canada’s world class petrochemical hub. Oilsands and unconventional natural gas are abundant in the province and new technologies to unlock these resources have resulted in huge production growth.
In 2010 crude oil production levels were 1.6 million barrels per day (bpd), of which about 75% is bitumen from oil sands. The development of this resource is estimated to see production volumes rise to 3.5 million barrels per day by 2020. (Launching Alberta’s Energy Future – Provincial Energy Strategy)
The province has the technology, internationally recognized energy companies, skilled workforce, and resource diversity to produce a range of products along the energy value chain.
As energy production is increasing in Alberta, the ratio of value added products to raw bitumen exports has been declining. Without an intentional policy to facilitate the expansion of the value chain the opportunities for future generations may be diminished.
Expanding the value chain will provide several strategic benefits to Alberta that include:
The AAMDC has no active resolutions directly related to this issue.
The Government of Alberta recognizes the importance of energy processing and has demonstrated its support through initiatives like the Incremental Ethane Extraction Program (IEEP) and the Sturgeon Refinery. Capturing greater value from Alberta’s vast energy resources is essential to the province’s rebalanced fiscal framework and Albertans’ continuing prosperity.
Alberta’s downstream energy industry includes oil refineries and upgraders, petrochemical facilities and fertilizer manufacturers.
Alberta is home to Canada’s largest gas processing sector which includes world-scale petrochemical plants and the largest fertilizer facility in North America. Alberta has in excess of 450,000 barrels per day of refining capacity that meets Western Canada’s transportation fuel needs (mostly from the Shell, Imperial and Suncor refineries located within Alberta’s Industrial Heartland.) Alberta’s Provincial Energy Strategy articulates a policy preference for adding-value to energy products and expanding the economy “by encouraging the further processing of bitumen, oil, natural gas and coal in Alberta to increase jobs, diversify the economy and raise tax revenues for Albertans.”
Alberta could see significant new investment in gas processing as Alberta has an abundant supply of competitively priced natural gas. Alberta is focused on finding multiple pathways to markets, including movement along the energy value chain. Bolstering the Province’s connections to the global energy market opens the door to an expanded and integrated petrochemicals and chemicals sector and invites investment further down the energy value chain in new technologies such as gas to liquids, diesel and other value-added energy processing.
Petrochemicals provide a stable and predictable source of revenue to Alberta in terms of corporate, payroll and personal taxation and also represent a key downstream demand source for Alberta natural gas which is used as a fuel. This sector is the largest intra-Alberta consumer of natural gas, consuming more than1.3 billion cubic feet (BCF) per day at nameplate manufacturing capacity. At present, Alberta’s ethane-based petrochemical industry serves as a market for roughly 35 per cent of the inter-Alberta destined natural gas.
Alberta is Canada’s largest manufacturing location for petrochemicals. Petrochemicals have been Alberta’s top manufacturing sector since 2001, accounting for 33 percent of all Alberta manufacturing exports (2010). The petrochemical industry adds roughly nine times the value to the raw resource, in processing it from ethane to polyethylene.
In 2011, Alberta’s petrochemical sector had $13.5 billion in combined annual sales. This is greater than the agrifood sector ($12.2 billion) and more than twice the economic impact of the province’s $5 billion tourism industry.
In 2010, the petrochemical industry was Alberta’s third largest export sector, behind only crude petroleum and gas/gas liquids. Four world-scale ethylene plants with a combined annual production capacity of 8.6 billion pounds operate in Alberta, representing a world-class downstream industry.
The Alberta industry directly employs 5,880 individuals with an additional 14,700 in indirect employment. The average petrochemicals salary is $93,000.
Through the Bitumen Royalty-In-Kind (BRIK) program, additional refining capacity with the North West Upgrader project will ensure that there are adequate supplies of diesel for Albertans and the Western Canadian economy.
In addition to refining capacity, Alberta also has approximately one million barrels per day of upgrading capacity in Alberta’s oil sands region (Suncor, Syncrude, CNRL and Opti-Nexen upgraders located in Fort McMurray) that upgrade Alberta’s oil sands bitumen into Synthetic Crude Oil.
Policies and programs such as the Provincial Energy Strategy (2008), the Bitumen Royalty in Kind program (2011), the Incremental Ethane Extraction Program (2011) and the Alberta Competitiveness Council: Moving Alberta Forward initiative (2011) confirm the importance the Province places on maximizing return to Albertans from their energy resources.
The Government response explains the importance and significant impact of various value-added ventures that are present within Alberta. While these are significant, it does not fully address the resolution. The first point is well addressed in the response and the government’s commitment to the Energy Strategy and expanding the energy value chain is apparent. However there was no commitment expressed that the Government of Alberta would advocate for ‘value creation’ to be a part of any Canadian energy policy framework, nor was there any comment on how the government intends to address potential labour shortages. As such, the AAMDC gives this resolution the status of Incomplete Information and will follow up with the Ministry for clarification.