Grande Prairie petrochemical plant deal goes belly up and the UCP is MIA

A proposed $4 billion methanol plant for the Grande Prairie area that would have brought thousands of construction jobs to northern Alberta has gone belly up and it’s not the first time a big value-added petrochemical project has vanished on the UCP’s watch. 

Nauticol Energy’s petrochemical project got positive press from both Rachel Notley’s and Jason Kenney’s governments as well as promises of substantial government subsidies once their plant was in operation. But Nauticol seemed far more adept at securing positive government announcements than it did at securing the capital from financial markets necessary to build the project. 

The NDP were quick to seize on the project’s demise: NDP energy critic Kathleen Ganley says “the government owes an explanation to Albertans, to tell them they didn’t just let this investment go away, that they didn’t just let these jobs disappear.”

And the chair of the company, former AIMCo CEO Leo de Bever, is playing coy about why the deal died.

“We had to stop the project because we had to bring together a number of parties (including investors and the provincial government). And it turns out, one of the parties didn’t fulfill their commitment—let’s put it that way—and we ran out of time,” said de Bever in a Postmedia interview

A rendering of Nauticol's proposed methonal plant from their now defunct website. 

While Rachel Notley’s government offered $80 million in natural gas royalty credits to the project, the UCP brought in the Alberta Petrochemicals Incentive Program in 2020, which provides grants that are worth 12 per cent of a project’s capital costs once the facility is operating. Based on an estimated capital cost of $4 billion Nauticol would have been eligible for a $48 million grant. 

“In a project like this . . . you need the support of government, in terms of saying, ‘Yeah, we want this to happen.’ You need some help financially. You need the financial sector to do its thing. You need the operating companies that supply the gas to do their thing . . . Most of those things were in place.

“But in the end, you still need to raise the money to get to a final investment decision,” said de Bever.

The project cancellation comes after a $4.5 billion petrochemical project put forward by Pembina Pipelines and the Kuwait Petrochemical Corporation was suspended in December 2020 and officially canceled in fall of 2022. The official reason given for that cancellation was COVID but it also happened on the UCP’s watch. 

Another proposed methanol project for the Grande Prairie area, this one being put forward by Northern Petrochemical, is still on the hunt for capital. Northern Petrochemical has secured positive government press and the promise of subsidies once operational too, but there’s been little public movement on the project since Jason Kenney and Travis Toews held a splashy news conference in November 2021, making big promises about jobs and investment in the area. 

According to Geoff Bury, the CEO of Northern Petrochemical the project is still moving forward but he does not have any news to report.

“We expect once we reach a final investment decision the construction period will take 40 months… When we reach a final investment decision is much more of an open question because of how many moving parts there are but we expect to reach a final investment decision in 2024,” said Bury.  

Nauticol said they had raised $35 million before the project failed, with at least $26 million of that coming via the exempt securities market. Northern Petrochemical has made no announcements about capital partners nor has it raised any money on the exempt securities market. The website is a bare-bones, one-page affair that hasn’t been updated since 2020 and doesn’t offer much in the way of information. 

If Nauticol, with names like Leo de Bever and former Encana CEO Randy Eresman on the board of directors, can’t find the capital to build their project it doesn’t look good for Northern Petrochemical. 

But these projects, which take natural gas and turn it into something like methanol, ammonia or polypropylene (used for medical grade plastic) are mostly a good idea. These projects usually have some kind of nod to climate realities–the Nauticol project and the proposed Northern Petrochemical project were both going to be powered by renewable energy and capture their CO2. And the construction employs a lot of working folks while the province moves further up the oil and gas value chain. 

Alberta has spent decades just ripping and shipping dinosaur gas out of the ground  with the vast majority of the benefits flowing to oil and gas magnates and not to the people of Alberta. These mega-projects are needed but they seem to have a high failure rate and difficulty in attracting capital despite substantial government subsidies and political photo-ops. 

Industrial policy can be a tricky subject but the UCP seem far more interested in culture warring and Ottawa-bashing than actually making sure these mega-projects go ahead. For instance, there doesn’t seem to be any urgency in getting a final investment decision from Dow about a $10 billion ethylene cracker project that was originally pitched in Oct. 2021. Alberta has the potential to diversify its economy away from just shipping raw oil and gas to its nearest customers but it is going to take significantly more leadership to get there.