Building Alberta’s Value-Added Energy Future Presentation to Building Trades Association

September 21, 2016

Our Time Together #ABHeartland

Alberta’s Industrial Heartland: Did You Know?

Opportunities: Globally & Here at Home

Challenges

Call to Action

Questions

Our Time Together #ABHeartland

AIHA: Partnership and Purpose

Wayne Woldanski, Gale Katchur (Vice Chair), Tom Flynn, Roxanne Carr, Ed Gibbons (Chair)

#ABHeartland

AIHA: Partnership and Purpose #ABHeartland

Investment Attraction &Retention

• Global Network

Policy Advocacy

• GOA/GOC

Stakeholder Engagement

• Local /Regional/National

Alberta’s Industrial Heartland

• 582 square Kilometers of industrial land

• Western Canadian Hub for oil and gas logistics: pipeline, rail, roadway

• Value-Added products bound for global markets: petrochemicals, fuel, fertilizer, +++

• Synergies allow for waste product of one company to be feedstock for another

#ABHeartland

Alberta’s Industrial Heartland

• $30 billion in investments

• 40+ Companies

• 6,700 full time employees

• All trades employed

• $1.5 billion in local spending

#ABHeartland

Alberta’s Value-Added Economic Engine

Net Benefits by the Numbers

⁺ $30 billion+ in current industrial investment

⁺ 24,000 construction jobs

⁺ 6500 operational jobs, 23,000 indirect jobs

⁺ $650 million in payroll taxes

⁺ $65 million to provincial revenues from employees

⁺ $1 billion in new federal corporate taxes

= VALUE ADDED DEVELOPMENT ADDS UP

#ABHeartland

Alberta at a Cross Roads #ABHeartland

• Uncertainty in oil and gas

• Rising unemployment

• Adapting to new government directions

• Climate Change pressures

• Market access for energy

• Diversification competition

1. Better return for our commodities as they are developed further down the value chain.

2. Continued development of value added products opens markets and creates jobs.

3. Petrochemicals are in demand.

4. AIH is a proven as a centre for oil and gas production.

#ABHeartlandNew and Emerging Opportunities

The Petrochemical Industry

• Oil and gas is the base of the petrochemical industry

• Global sales expected to exceed$791 billion by 2018

• Strong fundamentals at home support further development of Alberta’s petrochemical sector

#ABHeartland

Global Petrochemical Demand: The Real Deal #ABHeartland

* Source: IHS Global Inc.

Our Competitive Advantage

• Feedstock is the major cost in producing petrochemicals

• Alberta has been shown to be competitive in three main areas (C1, C2, C3 chains)

#ABHeartland

7368 66

109

6

1116

17

5 66

POLYPROPYLENE POLYETHYLENE METHA NOL

Feedstock Variable Fixed Transport

* Source: IHS Global Inc.

Supply Side Economics #ABHeartland

Natural Gas Pricing Sept 7th, 2016 YTD Average Price

Alberta Spot ($C/mcf) $2.23 $1.77

USA Spot ($C/mcf) $3.62 $2.97

Differential ($C/mcf) $1.39 $1.20

Cost Discount % 62 % 69

* Source: PSAC Market Report

#ABHeartlandCost Advantaged Feedstocks

News from the USA #ABHeartland

The American Chemistry Council counts 266 petrochemical projects planned across the country

through 2023 that will cost $164 billion to build. Driven by a surging domestic supply of low-cost natural gas and natural gas liquids (NGLs), the U.S. petrochemical industry has been revitalized.

Alberta’s Next Investment Wave Potential #ABHeartland

Project Type Capital Invested Construction Jobs Operating Jobs

Methanol (x2) $ 5.0 billion 5,000 500

Fertilizer/Urea (X1) $ 1.5 billion 2,000 150

Ethane Cracker (X1) $ 6.5 billion 5,000 250

Partial upgrader (x3) $ 3.5 billion 3,000 300

Small Scale GTL (X2) $ 1.0 billion 1,000 150

Propylene (x2) $ 6.0 billion 5,000 300

NWRP (phase 2) $ 8.0 billion 8,000 250

TOTALS $31.5 billion 29 000 1900

• Over $25 billion in petrochemical development potential

Visits by 22 companies over the past three years

Currently engaged with 16 different companies

Recent MOU with CCGRF signifies the global interest for investments here

Phase 2 NWR, PDH developments, Rail Terminals

Alberta petrochemical diversification program attracts

16 applicants (June 6th, 2016)

#ABHeartlandInvestment Opportunity in AIH

Our Challenges

1. Competition from other regions to attract value added investments

2. Higher construction costs

3. Regulatory Processes

4. Capacity limits of current energy infrastructure

#ABHeartland

Impacting Our Global Competitiveness

Competition from other regions to attract value added investments

The Difference Makers

GOA Programs: BRIK; Petrochemical Diversification Program(PDP)

GOA Interface: Investors & Stakeholders

#ABHeartland

“Pennsylvania tax incentive plan played major role in luring Shell cracker plant”-Triblive, June 2016

Impacting Our Global Competitiveness

Higher construction costs

The Difference Makers

GOA Programs: BRIK; Petrochemical Diversification Program(PDP)

#ABHeartland

“One petrochemical executive estimates that construction costs are still roughly 30 percent higher in Alberta than the

U.S.- Alberta Oil, Feb. 2016

Impacting Our Global Competitiveness

Cost and timeliness of regulatory processes

The Difference Makers

Streamlined regulatory processes without compromising standards

#ABHeartland

Pre-feasibility Study 6 months

Feasibility Study 12 months

Environmental Assessment 18 months

Front End Engineering Design 12 months

Detailed Engineering 12 months

Land Purchase

Municipal Permits

/Operating Approvals 12 -24 months

Construction 24-36 months

Impacting Our Global Competitiveness

Capacity limits of current infrastructure

The Difference Makers

• Clear, Consistent Rules

• Timely decision making

#ABHeartland

“Governments must be made much more aware of the potentially enormous economic and commercial consequences of extending regulatory review and decision-making periods”-

Fraser Institute, July 2016

The Call to Action

1. Be a strong voice to government

• For value-added energy development

• That is creating jobs for your membership and sustaining our communities

• It is needed, proven and results in an economic win for Alberta and Canada.

• Talk to your MLA, MP’s, Members of Cabinet & Departmental Officials

#ABHeartland

The Call to Action

2. Become engaged in the policy discussions

• Speak to those issues that can significantly reduce or improve our region’s competitiveness

• Streamlined environmental regulations, a longer term value-added strategy and timely decisions improve our competitiveness & puts your membership to work.

• Provide input to policy processes such as Energy Diversification Advisory Committee

#ABHeartland

The Call to Action

3. Become part of the bigger value-added conversation

• Energy infrastructure affects our development – let’s continue to talk to our national counterparts.

• Ensure continued partnerships with other organizations like AIHA & RDC who are promoting value added development and job creation.

• Create the conversations at the local level- the job sites, the lunch counters and in your neighborhood.

#ABHeartland

In Summary: Moving Forward

• Fundamentals are in place to build on our energy strengths and diversify the economy.

• New Investment and continued development in the Industrial Heartland creates positive impacts across the province and our country.

• Your voices will ensure we stay globally competitive and continue to work, together.

#ABHeartland

Pam Cholak

Director, Stakeholder Relations

pamela@industrialheartland.com

www.industrialheartland.com

#ABHeartland

#ABHeartland