Canadian governments need to be more proactive to attract new petrochemical plants to the country, says the head of a Calgary-based energy research body—and he’s hoping an upcoming conference in Kananaskis will drive that point home.
Allan Fogwill, president and CEO of the Canadian Energy Research Institute (CERI), says he’s hoping the 19th annual CERI Petrochemical Conference, which will bring together industry leaders, economic development advocates and senior government bureaucrats, will clear the way for more petchem investment in Canada.
“We [need to] appreciate the opportunities and how we can work together to attract that investment,” he says.
In the current environment, where Canada must compete for investment with the billions flowing into plants on the U.S. Gulf Coast, Fogwill says both the federal and provincial governments need to understand the key role that incentives are playing.
“We have a global petrochemical market ripe with incentives,” he says.
“It’s not just the U.S. Gulf Coast states. Saudi Arabia is providing discounts of 75 per cent on feedstocks to petrochemical plant developers, for example.”
Fogwill said the federal government and the two provinces where the petrochemical sector is an important part of the economy, Alberta and Ontario, need to understand that government subsidies and other incentives have been used to attract dozens of new petrochemical plants in the last few years.
The U.S., thanks to the fracking boom that has unlocked large volumes of natural gas, now has a surplus of that commodity, which is the feedstock mostly used in North America.
Aside from offering low-priced feedstock, all the states are offering various incentives.
Particularly worrisome for the petrochemical industry in Sarnia, Ontario, he says, was the recent announcement that Royal Dutch Shell’s petrochemical division will locate a new plant in Pennsylvania, rather than in the southern Ontario city where it has historically had a presence.
This is a result of the boom in the Marcellus play of the northeastern U.S., which has unlocked large volumes of natural gas. The state government also offered incentives.
Fogwill says that so far the Ontario government has not developed a program aimed at attracting new plants or even retaining the ones already located there.
By contrast, he praised Alberta’s New Democratic government for developing a “brilliant program” called the Petrochemical Diversification Plan, which awarded $500 million in royalty credits last December to Inter Pipeline and Pembina Pipeline, which are planning polypropylene plants north of Edmonton.
Fogwill says the program, which only offers royalty credits if the plants are built, could be a model for more plants in the future that utilize abundant feedstock such as propane and butane, which have fewer export markets because of falling demand for Canadian natural gas in the U.S.
He says the petrochemical conference, which will attract about 140 attendees, will also hear a discussion about the prospects of developing new petrochemical plants in Alberta utilizing its abundant volumes of methane, which is a direct byproduct of natural gas production.
There’s only one major methane-based plant in Alberta now, operated by Methanex Corporation in Medicine Hat.