Kevin Redden, NGPR general manager, says the city's abandonment program won't be affected by the province's drive to diversify petrochemical production. (CHAT News photo)

By Alex McCuaig

Opportunity for some in city

Drive for petrochemical diversification not enough to stop city wells from abandonment

Oct 9, 2020 | 5:13 PM

MEDICINE HAT, AB – The provincial government’s drive to take Alberta’s abundant natural gas resources to make it a leader in hydrogen, liquefied natural gas and petrochemicals production won’t be enough to sway the city to slowdown its move to abandon the majority of its natural gas wells.

In a media announcement earlier this week, Premier Jason Kenney was adamant in his support for diversifying the natural gas sector.

But with a glut of supply of natural gas keeping prices low, it won’t be enough to keep city-owned gas wells going.

“As we understand the province’s position is that they’re extending the value chain for natural gas therefore increasing demand,” said Kevin Redden, general manager of the city Natural Gas and Petroleum Resources (NGPR) division. “But the sites the city is focused on continue to be those well sites reaching the end of their economic life.”

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That, in combination with the low price of natural gas, costs associated with surface leases and property taxes, would require a spectacular rebound in the price of natural gas for the city to change course at this point, said Redden.

“We’d need to see values double what they are currently to be in a break-even situation. So, we’d need a significant increase with these assets to start making a profit,” he said.

Significant production out of Alberta’s Peace Region plus a continental glut of natural gas won’t likely see much movement on price in the near future.

But the low price of natural gas also brings opportunity by way of the petrochemical industry which in Medicine Hat has seen companies like CF, Methanex and CanCarb use gas feedstock to produce fertilizer, methanol and carbon black, respectively.

The Medicine Hat and District Chamber of Commerce was part of the consultations for the upcoming provincial petrochemical incentive program which has a goal of expanding existing manufactures while encouraging more to be developed in the province.

Executive director Lisa Kowalchuk says growth in the city’s industrial petrochemical sector is possible with the right incentives.

“Things like longer-term energy contracts, utility contracts … those things are all components of what these businesses are looking at so it really is about positioning and marketing and making sure that we have the best suite of services,” said Kowalchuk. “Essentially we want to ensure they can’t say no when they are looking at Medicine Hat as a place to invest.”

Details of the province’s latest petrochemical incentive program are expected to be released later this fall.