The time is right for Alberta to profit from bitumen’s low price by processing more of it at home, say the province’s unionists.
The so-called bitumen bubble makes it economically feasible for more local processing, which would create tens of thousands of jobs rather than piping them — and oilsands product — to the U.S. And China, Alberta Federation of Labour President Gil McGowan said in Calgary Wednesday.
“We should be taking advantage of this moment in time instead of wringing our hands over the price differential,” McGowan said in the lobby of the Palliser Hotel, normally the domain of kibbitzing energy sector brass.
He said the energy industry itself has long embraced the theory and with the price differential only widening recently, it makes even more sense to add value to taxpayer-owned resources.
“Why would we accept 30 percent of the the value when we could get 70 percent?” said McGowan.
“We have to starting acting like the owners of our resources.”
He also said the province needs to emulate the Lougheed Tory government of the 1970s by creating a publicly-owned company to encourage such activity.
“Alberta is the only major oil producing jurisdiction that doesn’t have its own champion in the industry,” said McGowan, adding former Newfoundland Premier Danny Williams has followed Lougheed’s example.
The province’s attempts to realize a world market price for bitumen have failed miserably, he said, and will continue to.
“We’ll never get a world price because bitumen is not oil…we should start using policy levers to make sure we’re upgrading here,” he said.
McGowan noted that about 50% of the province’s extracted bitumen is processed in Alberta — a number, he said, that’s expected to drop.
While it’s true the price differential makes refining more feasible, the increasing production of the rival light crude in the U.S. undermines that argument, said energy analyst Jackie Forrest.
“It has merits in the short term but now we have a domestic oil boom in the U.S. and that means Canadian light crude is going to need new markets,” said Forrest, a director with energy consultant IHS CERA.
That means more pipeline capacity would be needed to reach those new markets, she said — west coast routes facing increasing resistance in Canada.
As for government involvement in refining, the weak economic merits would demand considerable taxpayer investment at a time of squeezed budgets, said Forrest.
“Because it’s pretty challenging for the economics, upgraders in Alberta would take a lot of government support,” she said.
Labour to build the refineries would divert already scarce workers from other royalty-generating sectors of the industry, she said.
“You could argue that’s not the case with job creation, given the labour constraints in the province,” said Forrest.
Calgary Sun, Wednesday, Jan. 30, 2013
Byline: Bill Kaufman