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Alberta plans to spend up to C$1B to boost petrochemical output

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Alberta plans to spend up to C$1B to boost petrochemical output

Alberta, Canada's most prolific gas-producing province, will offer up to C$1 billion to companies to kick-start new liquids processing projects.

The province on March 12 unveiled details of a program that would see a combination of loan guarantees and royalty credits to bolster supply and manufacturing of value-added gas products. The program, known as the Energy Diversification Act, offers C$500 million each to petrochemical manufacturers and to midstream companies to build facilities to strip feedstock from raw natural gas. The legislation also includes a previously announced C$1 billion program for development of partial upgrading of oil sands bitumen.

Alberta's energy-reliant economy has been hit hard by U.S. shale gas that has flooded traditional markets and driven down Canadian gas prices. Increased petrochemical production would provide jobs and a new market for gas from the Montney and Duvernay shales, which straddle the Alberta-British Columbia border. Alberta's government would also benefit, as it owns most of the gas in the province and charges producers royalties on their output.

"By supporting diversification in our energy sector, we're supporting good jobs and building an economy to last," Energy Minister Margaret McCuaig-Boyd said in a March 12 statement. "Adding more value to our raw products at home means more jobs for Albertans and getting top dollar for our resources."

As producers have tapped shale deposits, an abundance of NGLs has swamped Alberta processors. In the first round of incentives, valued at C$500 million, the government approved two proposed plants. Inter Pipeline Ltd. has decided to go ahead with a C$3.5 billion project, and a venture led by Pembina Pipeline Corp. is working on front-end engineering and design for another plant. Other jurisdictions have offered incentives to lure petrochemical producers, including Pennsylvania, which reportedly offered Royal Dutch Shell PLC US$1.65 billion to build a plant.

The Petrochemicals Feedstock Infrastructure Program is aimed at increasing supplies of ethane, a key component in plastics and other chemical products. Projects eligible for funding under the provincial program could include new extraction plants built closer to gas fields or so-called straddle plants, which are built along large pipelines that can isolate chemicals during transportation.