Industrial Outlook for Alberta

Jan 2008 [Alberta Construction Magazine]

Alberta’s industrial construction sector is seeing a shift in its centre of gravity.
by Godfrey Budd

In recent years, oilsands development in the Fort McMurray region has accounted for the lion’s share of industrial construction projects in the province. This has been the pattern since the current round of expansion began around 2000. But it is about to change….

The year 2007 saw construction starts on two Edmonton-area upgrader projects. After receiving board approval in November 2006, construction began on the expansion of Shell’s upgrader at Scotford in Strathcona County. Construction on the $5.6-billion project is scheduled for completion in 2010. BA Energy’s Alberta Heartland upgrader also saw a construction start in 2007. Phase 1 has an estimated cost of $1.1 billion, according to the provincial government. It is being built northwest of Bruderheim, with completion scheduled for 2008.

As is the case with so many oilsands projects, other phases of the Heartland upgrader to be built stretch well into the future. Phase 1 should see the start of operations in 2008. According to the company’s website, this will produce about 77,000 barrels of upgraded oil per day. But, by 2013, when a projected third phase should be complete, production is supposed to hit more than 200,000 barrels per day.

BA Energy does not include the cost of all three phases, perhaps because a meaningful estimate of the actual cost would be hard to arrive at. The completion year, 2013, is five years away and the inflation rate in the province’s construction sector as a whole has been oscillating between and one and two per cent per month since late 2005.

Big projects ahead

There are several upgrader projects that could help put the Edmonton area on par with Fort McMurray for oilsands construction….

Today’s spending levels are in sharp contrast to those of even four or five years ago. Statistics Canada figures from 2002 to 2004 show spending on oilsands projects at $6.9 billion, $5.2 billion and $6.3 billion, respectively. Capital expenditures on oilsands projects jumped to $9.9 billion in 2005 and then to $11.6 billion in 2006.

In 1997, before the current rush for oilsands development got underway, capital spending was $1.7 billion. That was when there was no major new project under construction. The reason for such an outlay, despite no major new project, stems from the fact that large heavy oil production facilities require “huge volumes of sustaining capital,” says Herb Holmes, Edmonton manager for Construction Labour Relations….

A crunch is coming, and many observers believe it’s likely to hit in either 2009 or 2010. Averaged out, CAPP’s figure of $48 billion for 2009–2010 means $24 billion per year spent on oilsands development. Given how stretched resources are already, industry watchers are saying that the capacity is simply not there.

“Unless something radical happens, it’s impossible for the work to be done on schedule,” Holmes says. “By radical, I mean for example a huge influx of workers. Also needed would be tools, machining equipment, engineers. We are seeing shortages now and we are not yet at the peak.”….

It seems that Alberta’s industrial construction is almost all about energy. Vegreville could be the site of a $400-million ethanol plant that will convert straw into biofuel. The project, however, is not in the bag yet. Ottawa-based Iogen Corp. is also considering sites in Idaho and Saskatchewan for the facility.

Besides oilsands projects, other energy sectors are also facing challenges to get their projects off the ground. There are more than half a dozen wind power projects waiting in the wings, all in southern Alberta….(Full Story)

This entry was posted on January 3, 2008 at 8:06 am and is filed under Community & Industry, Sulphur-Related Construction Costs. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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