For years, Alberta premiers have been speaking about the importance of diversification in helping decrease the province’s heavy reliance on oil and gas royalties. The concept has become so often repeated it might as well be incorporated into their oath of office.
Yet progress on the file has remained slow. For one thing, building a billion-dollar petrochemical plant is particularly challenging when oilsands megaprojects are sucking up most of the province’s skilled trades and fabrication capacity. For another, there are already large industrial complexes much closer to tidewater—the U.S. Gulf Coast, for example—that tend to attract investment dollars far more readily than landlocked Alberta.
Now, with low oil prices forcing a time-out on the oilsands industry, the time is ripe for a new expansion push by the province’s resource manufacturing sector. Earlier this year, many of the key players in the local industry—including NOVA Chemicals, Williams Energy Canada and NW Refining—banded together as the Resource Diversification Council (RDC) to identify potential areas where the province could add value to its energy products. The group has also brought to the table labour organizations like the Building Trades of Alberta and Construction Labour Relations—Alberta, as well as consultants like Stantec.
Ian MacGregor, the RDC’s vice-chair, is well positioned to help lead this fight. As president and chief executive officer of NW Refining, he is building the Sturgeon Refinery, and he has spent years preaching the value-add gospel to anyone who will listen. In fact, the council’s members are currently building over $13 billion in projects in Alberta, he notes. If any group can offer insight into what needs to be done to bring more resource manufacturing projects to the province, this is it.
Alberta Construction Magazine editor Joseph Caouette spoke to MacGregor on what needs to be done to expand the province’s petrochemical and refining sectors and how the construction industry can help.
ACM: Why is there a need for a group like this?
MacGregor: We just thought it made sense to get the people that have a vested interest in the diversification of Alberta’s economy together. So there are a bunch of owner people like us, we’ve got some of the labour union people involved, and we thought we could form a community of interest. We all want to see Alberta become a better place and be a stronger economy. We just got together and talked about what that meant and how we could advance the cause.
ACM: What have been some of the challenges in the past for new diversification projects?
MacGregor: It’s everything from feedstock supply to cost. We’ve got to make sure we have enough feedstock that comes from the right places. We have to control the costs of conversion, so we have to figure out how we can build big processing plants cost-effectively. Then there’s how we operate them in the end to make sure we make Alberta a better place and leave the environment better when we’re done. We tried to get people that have expertise and then said we’re going to work together to do this.
ACM: There’s definitely a lot of feedstock in Alberta, such as natural gas, natural gas liquids and bitumen. Are low feedstock prices enough to move these projects forward?
MacGregor: Low feedstock prices are everywhere, not just here. It hasn’t altered our competitive advantage. What we’ve got here is a stable place to work. There are skilled people who can build things here. There are lots of engineers and tradespeople to build projects, and they’re pretty good at doing it. What we have to do is make the process as easy for people as we can.
Alberta has had a reputation as a pretty expensive place to build, and we’re a long way from the export markets, so we have to work on all those problems at the same time. When we build in the wilderness with people coming from other places, it gets a lot more expensive, but I think we can actually build here pretty cost-effectively. If we make the right kind of products that are high enough value, we can transport them in many different ways. We don’t have to plug up export infrastructure with low-value products.
ACM: Are you pushing for any particular government policies?
MacGregor: It’s early days for us. We just got together, and I think we’re working to define the problem and trying to figure out what lower hanging fruit we can get to easier. We’re working through that right now with our membership.
ACM: Do you have a sense of what that low hanging fruit would be? What are some of the good potential project areas that you see out there?
MacGregor: What are the next projects that feed off of what we’ve built already? The founding members of the council are refining, natural gas liquids and petrochemicals. People in the council are spending something like $13 billion on different projects. There’s pretty extensive activity going on right now. Probably 9,000 people are working on different projects that members of the council are involved in. We’re leading with our chin on this one right now.
ACM: One of the striking things about this group is how you’ve incorporated building trades and consulting companies into the membership. This isn’t just a project owner group. Why was it important to get organizations like that involved?
MacGregor: I think we’ve all got a role to play. The world has changed over the last 30 years. People who did these projects used to see themselves as adversaries. Over the 30 or 40 years I’ve been doing this, I’ve realized we’re all doing this together now. We can’t build this plant. I don’t know how to weld, but there are lots of people here that do, and we have to get all those people focused on the real thing we’re trying to do: create lasting sources of employment and create lasting value in the economy. We’re already aligned on those two objectives, so we felt having everyone at the table was the best way to do that.
ACM: What can the rest of the construction community do to help encourage these projects?
MacGregor: The main thing is we have to counteract this idea in the world that Alberta is a really expensive place to build things—that it’s too expensive to think about doing them here. All of us that build things have a role to play in that. What happened is we were always living in a world where there was too much. There were too many projects to do, and everyone was wondering how they were going to do them. I think we’ve changed to a world where there isn’t enough, and that partly helps. But we have to realize that because we’re so far from the market, we need to have some real significant advantages, and cost-effectiveness and how well the plants operate are part of that.