Alberta has given the green light for the province’s commercial oil and gas agency to secure nearly $1 billion for investments in the market, a move that could potentially attract a private investor to support a pipeline project to the British Columbia (B.C.) coast, as indicated by an industry expert.
The authorization serves as a credit line for Alberta’s Bitumen Royalty-In-Kind (BRIK) program, which was introduced in March. This empowers the Alberta Petroleum Marketing Commission (APMC) to borrow up to $900 million for activities related to marketing hydrocarbons.
Richard Masson, a former CEO of the commission, highlighted that these activities encompass actions such as purchasing shares, issuing loans, forming joint ventures, guaranteeing obligations, and establishing subsidiary corporations. Masson, presently an executive fellow at the University of Calgary’s School of Public Policy, suggested that these actions could position APMC to spearhead a pipeline project to the northwest coast.
However, a spokesperson from the province’s energy and minerals department clarified to CBC News that the credit line is not directly linked to any current or future pipeline endeavors. The statement emphasized that the credit line represents potential funds available for use if necessary.
The construction of a privately-funded pipeline to the B.C. coast was a crucial component of a significant energy agreement signed between the province and the federal government last year. Yet, no company has yet taken the initiative to undertake this project due to the inherent risks associated with pipeline ventures, compounded by challenges like the B.C. oil tanker ban and opposition from Coastal First Nations.
Masson underscored the cautionary tale of Enbridge’s investment of $600 million in the now-cancelled Northern Gateway pipeline project. The borrowing authority granted to APMC could serve to mitigate financial risks for a private investor interested in the pipeline project.
The authorization allows the province’s finance minister to raise funds through government securities and allocate them to APMC. Masson explained that this borrowing authority could offer a safety net for a private investor while reducing their financial exposure.
In contrast, Robert Johnston, director of energy and natural resources policy at the University of Calgary’s School of Public Policy, noted that the credit line does not directly impact a potential pipeline initiative. Instead, the focus is on enhancing marketing capabilities in the U.S. or Asia using existing infrastructure.
The BRIK program marks a shift from a cash royalty system to collecting bitumen royalties in barrels for direct-to-market sales through APMC. This approach could strengthen negotiations with Asian refineries, particularly government-owned entities that prefer government-to-government dealings.
The implementation of the program was considered during Masson’s tenure at APMC but was deemed too intricate, potentially complicating the direct sales process for producers. The current reintroduction of the program is likely aimed at boosting oil volumes in existing pipelines to support ongoing expansions.
While capacity enhancements are underway for pipeline systems like Enbridge’s and Trans Mountain, changes in how bitumen royalties are collected are not essential, according to Masson. The increase in oil volumes can be facilitated by purchasing oil and transporting it through the pipelines.