Alberta’s Refining Plans Panned as ‘Dream’ by Oil Executives

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The new Alberta premier’s plan to spur job creation by boosting oil refining and processing in the province is being panned by industry executives, who say costs and the infrastructure needed for such facilities make them difficult to achieve.

Rachel Notley, whose election last month from the left-leaning New Democratic Party ended more than four decades of Progressive Conservative rule, has said she wants to encourage more processing of crude at home, instead of sending it elsewhere. The idea follows similar efforts by past leaders, starting in the 1970s by then-Premier Peter Lougheed.

“It’s a great dream, but it’s been 44 years in the making and we haven’t figured it out yet,” Doug Proll, executive vice president of Canadian Natural Resources Ltd., said Monday at a conference in New York organized by RBC Capital Markets. “While some progress has been made, there are huge hurdles.”

Among the hurdles is the fact that U.S. refineries are already set up to handle the heavy crude that Alberta produces. “The best economic solution is to get that crude to these facilities,” said Paul Masschelin, senior vice president at Imperial Oil Ltd., the Canadian company majority owned by Exxon Mobil Corp.

Building a refinery in Alberta would have cost Husky Energy Inc. double what it ended up paying for stakes in existing facilities in Ohio, Chief Operating Officer Rob Peabody said at the conference.

Building Into ‘Headwind’

“Building more of that is building into a headwind,” Peabody said. “In the absence of a lot of public money going into something like that, it’s quite difficult to move forward.”

The Alberta government is trying to diversify the economy and help it better weather oil price swings, Energy Minister Margaret McCuaig-Boyd said in an e-mailed statement. The province will examine how to reward companies that process more crude in Alberta in its review of royalties collected from producers, according to the statement.

Even if new refineries or upgraders -- which help to process bitumen from oil sands -- are built, Alberta doesn’t have a network of pipelines to carry product within the province or to other markets, Canadian Natural’s Proll said.

The focus on creating jobs shouldn’t trump economics, said Alister Cowan, chief financial officer of Suncor Energy Inc.

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