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Notley will bid $ 2 billion to squeeze more oil into blocked pipelines

Alberta's Prime Minister Rachel Netley made a message to Edmonton, Alta. On Sunday, December 2, 2018.

Jason Frankson / Canadian Press

Alberta Prime Minister Rachel Nottte is expected to announce a $ 2 billion private investment in a partial modernization designed to allow the province's oil sector to push more crude oil into overpopulated pipelines.

The project, which is expected to announce Tuesday, will include a company in Calgary and will be located in the Edmonton region, according to a government source familiar with the project, who has no right to speak publicly about it.

Increased modernization capacity is one of the many policies of Mrs. Netley's government, which aims to cope with the constant low prices of Canadian oil and the lack of new pipelines to bring Alberta to new markets. It encourages a plan that also calls for increased oil by rail and production cuts, as its NDP government prepares for the spring elections.

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Previously, the province announced $ 1 billion of loan guarantees and grants for partial renovation projects to add between two and five facilities. The government is reviewing the applications. It is unclear what incentives the province has proposed for the project, which will be announced on Tuesday.

The company behind the project has signed a letter of intent and has not yet made a final investment decision, the source said. If it continues, it will include 2,000 jobs.

Major oil sands producers have been unable to invest in new modernization capabilities in recent years, thanks to billions of dollars in pricing and the volatile economy. However, a few small businesses billed themselves as nippers. These include creating value that previously proposed a partial renovation project, and Enlighten Innovations Inc.

In May last year, Alberta's energy regulator approved the revised application to create value for bitumen enhancers and refineries near Edmonton. At the hearing, he set the capital costs of $ 3 billion. The company's efforts to build such a project date back to 2004 when BA Energy, whose value creation was acquired, was first proposed. It is called a heart-processing plant.

The last major processing plant, the $ 9.7 billion Sturgeon refinery, also located near Edmonton, had to begin to process bitumen by the end of 2018. The project, owned by North West Refining and Canadian Natural Resources Ltd., suffered a series of costs. exceedances that were supported by the Alberta government. Its supply of bitumen comes from Canadian Natural and Alberta, through the oil it receives instead of cash.

Richard Mason, a member of the School of Public Policy at the University of Calgary and the former head of the Petroleum Marketing Commission in Alberta, said that partial modernization facilities are supporting the province's oil sector in two ways. Modern oil requires far less diluent than unprocessed bitumen to transport through pipelines, which means that the partially modernized oil takes up less space. And middle-class oil from such a facility can be processed in more US refineries, which expands the market for this oil.

"To the extent that you can bring part of the product to these medium-volume refineries, it expands your market so you will get better price and more competition," said Masson in an interview,

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"And to the extent that you have less congestion on the pipeline, then you will not have all these backup copies of the inventory."

The provincial government has ordered production cuts that came into force at the beginning of the year, which has reduced the price difference – known as the difference – between the oil from Alberta and the intermediate plant in West Texas. Last fall, the gap reached $ 50 a barrel, but in the last few weeks it has shrunk to less than $ 10.

Ms. Notley promotes a plan to buy railway wagons to increase rail transport by rail and requires the federal government's financial assistance.

Last autumn she invited the industry to submit proposals for a new refinery in the province. The government has not said what incentives it will be prepared to offer. The deadline for submitting proposals is 8 February.

Reports by Jeff Luis and Jeffrey Jones

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