Albertas Industrial Heartland

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Future Potential and Challenges
January, 2009 Neil Shelly, AIHA
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Albertas Industrial Heartland

• Albertas Industrial Heartland Association (AIHA)
  was founded in 1998 as a cooperative effort of
  the Counties of Lamont, Strathcona, Sturgeon and
  the City of Fort Saskatchewan
• Complementary Area Structure Plans (CASPs)
  created a heavy industrial zone to capitalize
  upon the natural advantages the area has to
  offer.

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Canadas Largest Heavy Industrial Park 533 sq.
kms of developable land
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History and Development

• Development in the area began in the middle
  1950s
• Since its beginnings, the Heartland Region has
  grown to become the Largest Hydrocarbon
  Processing Centre in Canada and is home to 20
  world scale operations

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Logistical Advantages

• Crossroads of Albertas oil/gas pipeline system
• Salt caverns for gas and compressible liquids
  storage
• Access to both national rail systems and
  established logistical centers
• Pre-zoned land for heavy/medium industrial
  development
• Established support organizations and agencies

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• Albertas Industrial Heartland
• Capital Region Advantage
• Skilled workforce
• Supply and service centre
• Educational institutions
• Centre for RD
• Engineering and design
• Quality of life

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Future Growth PotentialThe Bitumen Economy

• The Heartland Region has been selected as the
  centre for bitumen upgrading in Alberta due to
  its logistical advantages
• Six major upgrader projects announced for the
  area to bring upgrading capacity up to
  potentially 1.6 million barrels per day
• Significant volumes of by-products will be
  produced in the form of petroleum coke, off-gases
  and other products
• Feedstock for a new chemical industry independent
  from the price shocks of oil and natural gas

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GEA UPGRADERS AN ILLUSTRATIVE VIEW
PetroCanada 350,000 bpd
Petrochemical and Processing Plant
Agrium (Fertilizer Plant)
Lamont County
Sturgeon County
Northwest 150,000 bpd
BA Energy 150,000 bpd
Refinery
Existing Upgrader
Degussa Peroxide
Shell Chemicals
Shell Current 155,000 bpd
Proposed Upgrader
Proposed 700,000 bpd
Natural Gas Processing
Shell Refinery
Provident Fractionation
Total EP Canada Phase 1 130,000 bpd
StatOil/NAOS 250,000 bpd
BP Energy
Strathcona County
Keyera Energy
Dow Chemical
Sherrit International
City of Fort Saskatchewan
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Logistical and Auxiliary Developments

• Infrastructure
• Access Pipeline
• Waupisoo Pipeline
• Corridor Pipeline
• Enbridge Stonefell
• Provident Energy diluents storage
• Gateway TMX
• Keystone Terminals
• Air Products Hydrogen
• CO2 capture/ pipeline

• Oilsands
• Upgrading
• BA Energy
• Shell Canada (Phase 1 2)
• North West
• Fort Hills Upgrader
• StatoilHydro
• Total EP
• Suncor (land position)
• Other Interests

• Chemicals, Metals and Industrial Services
• Aux Sable HOP
• North Sable Extraction Plant
• Petrogas Liquids
• Sulphur prilling
• Catalyst recovery
• Gasification for Energy/Hydrogen
• Fertilizer
• Sherritt metals expansion

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Moving up the Value Chain, The Next Wave
Moving Up the Value Chain The Next Wave
Fuel Products Diesel Kerosene Gasoline Fuel
Oil Petrochemicals Ethylene Propylene Butadiene S
ynGas Hydrogen Naphtha Fertilizers Ammonia Ammoni
um Sulphate Elemental Sulphur Urea
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Review of petrochemical products that can be
produced from upgrader by-products
Potential Value Added Petrochemical Products
Most Viable Growth Options
Final screen Kline recommendation (77
products)
Detailed product analysis
2nd screen selection (90 products)

• NEXT STEPS
• Further investigation
• Feasibility studies

1st Screen selection (110 products still under
consideration)
DESIRED ATTRIBUTES

• Profitable
• Technology available

DESIRED ATTRIBUTES

• Clear growth drivers
• No excess capacity in the US
• Good cluster Integration potential

Initial universe of over 140 potential products
MUST HAVE ATTRIBUTES

• Scale
• Domestic market critical mass
• Demand Growth rate
• Import substitution potential US

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Petrochemical Development Potential
Petrochemical Cluster Potential
Joint project of the City of Edmonton, AIHA and
Province of Alberta
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Value Added PotentialAlbertas Industrial
Heartland.
UPSTREAM
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Chemical Cluster DevelopmentWorld Scale
ExamplesMarl, Germany

• Plant Area
• 650 ha.
• Available
• 60 ha.
• 70 companies
• 4,000 products

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Reality CheckCurrent Project Status

• Seven (7) Upgraders announced or underway,
  however only one (1) is currently under
  construction
• Project Status
• Shell (phase 1) Under Construction (2009
  completion)
• Shell (phase 2-4) Fiscal Review
• Petro Canada Regulatory/Fiscal Review
• Statoil Fiscal Review
• Total Fiscal/Regulatory Review
• BA Energy Seeking financial partners
• NW Upgrading Seeking financial partners

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Challenges

• Cost Inflation (2 to 3 times original estimates)
• Availability of Skilled Labor (22,000
  construction jobs at peak)
• Regulatory Uncertainty
• Announced Projects and Pipelines to USA
• "There's a range of options being looked at. One
  potential outcome is that all that upgrading is
  done in Alberta," Collyer said. "Another option,
  I suppose at the other extreme, is that none of
  it happens in Alberta and all of it happens in
  the U.S.
• David Collyer, Chair, Shell Canada
• Reuters, July 9th, 2008

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Economic Cost to Alberta(Our lost future)

• 75 billion in capital investment
• 6 billion in engineering design work
• 75,000 person years of construction employment
• 3,000 direct and 9,000 indirect permanent jobs
• 1.2 billion in lost Provincial corporate taxes
• 2.4 billion in lost Federal corporate taxes
• Est. 50 billion in GDP

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Launching Albertas Energy FutureProvincial
Energy Strategy

• Assessment of optimum targets for bitumen
  allocation (direct export, upgrading, refining,
  petrochemicals)
• Creation of a government-led organization
  dedicated to planning for and developing policy
  analysis and options for a cluster in Alberta

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Taking Action

• Underway
• Bitumen Royalty In-kind
• Support for Carbon Capture and Storage
• Future Watch
• Upgrader competitiveness review
• Infrastructure Support Programs
• Implementation of Energy Strategy

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Conclusion

• The world will need Albertas Oilsands resource
  in the future
• Recent fiscal crisis will make Alberta more
  competitive in the long term
• Abundant feedstock will generate significant
  interest in future petrochemicals developments
• Future industrial park developments will be
  needed to service industry.

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Contact Us

• Albertas Industrial Heartland Association
• 202, 9906 102nd Street
• Ft. Saskatchewan
• [phone]
• neil_at_industrialheartland.com
• www.industrialheartland.com