Notley announced a $ 2 billion facility intended to squeeze more oil into the clogged pipe



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Alberta Prime Minister Rachel Notley made an announcement in Edmonton, Alt., On Sunday, December 2, 2018.

JASON FRANSON / The Canadian Press

Alberta Prime Minister Rachel Notley is expected to announce $ 2 billion of private investment in a partially upgraded facility designed to allow the provincial oil sector to squeeze more crude oil into overcrowded pipelines.

The project, which will be announced by Notley on Tuesday, involves a Calgary company and will be located in the Edmonton area, according to government sources familiar with the project who are not authorized to speak openly about it.

Increased capacity building is one of several policies from the government of Ms. Notley is designed to overcome Canada's constantly low oil prices and the lack of new pipelines to bring Alberta crude oil to new markets. He has promoted a plan that also calls for an increase in oil through railways and a reduction in production as his NDP government prepares for spring elections.

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The province had previously announced a loan guarantee and a $ 1 billion grant for a partial improvement project with the aim of adding between two and five facilities. The government has reviewed the application. It is unclear what incentives the province offered for the project announced Tuesday.

The company behind the project has signed a letter of intent and has not made a final investment decision, said the source. If it continues, it will involve 2,000 construction works.

Major oil producers in recent years have refused to invest in increasing new capacity, due to the billions of dollars in price labels and a shaky economy. However, some small companies call themselves specialists in niche processing. They include Value Creation, which had previously proposed a partial improvement project, and Enlighten Innovations Inc.

Last May, Alberta Energy Regulator approved the revised application of Value Creation to increase and refine 188,000 barrels per day of bitumen near Edmonton. At the trial, it set a capital cost of $ 3 billion. The company's efforts to build such a project on the site began in 2004, when BA Energy, which obtained Value Creation, first submitted it. It's called the Heartland Processing Plant.

The last major processing plant, the $ 9.7 billion Sturgeon refinery, also located near Edmonton, will begin processing bitumen by the end of 2018. The project, which is owned by North West Southwest Refining and Canadian Natural Resources, is experiencing a series of cost overruns supported by the Alberta government. Its supply of bitumen comes from Canadian Natural and Alberta, through the oil it receives as a substitute for cash royalties.

Richard Masson, a colleague at the University of Calgary Public Policy School and former head of the Alberta Oil Marketing Commission, said the partial enhancement facility helped the provincial oil sector in two ways. Increased crude oil requires thinners that are far less than those of bitumen which are not processed to be transported through pipelines, which means that oil that is increased in part requires less space. And middle-class oil from such facilities can be processed in more American refineries, which expand the market for the oil.

"As far as you can put some products into this intermediate conversion refinery, it expands your market, so you end up with better prices and more competition," said Mr.

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"And as long as you have fewer pipe jams, you won't end up with all of these inventory reserves."

The provincial government ordered a reduction in production which came into force at the beginning of the year, which has narrowed the price gap – known as the difference – between oil Alberta and West Texas Intermediate. Last fall, the differential reached US $ 50 per barrel, but in recent weeks it has narrowed to less than US $ 10.

Ms. Notley has promoted plans to buy railroad cars to increase oil shipments by train and request financial assistance to the federal government.

And last fall he invited the industry to submit a proposal to build a new refinery in the province. The government has not said what incentives will be prepared to be offered. The deadline for proposals is February 8.

With reports from Jeff Lewis and Jeffrey Jones

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