CANADIAN OILPATCH / FINANCIAL
October 30, 1996
OIL'S WELL
. . . AND GAS IS GETTING BETTER
ÿ The recent flurry of massive investments in Alberta's oilpatch will fuel the province's economy next year, the Bank of Montreal's chief economist said yesterday.
ÿ Tim O'Neill, speaking in Calgary, said multi-billion dollar projects in Fort McMurray, Joffre and Prentiss will boost that growth to between 3% and 3.5% in 1997.
ÿ That's up from a projected 2.25% expansion this year.
ÿ "Alberta's going to be one of the better performing economies -- it's already demonstrated that this year," said O'Neill.
ÿ "The big story for Alberta, really, will be the resource sector, particularly tied to energy, for the coming year."
ÿ He noted there have been billions of dollars in investment announcements this year in the energy, chemical and pipeline sectors, including $5.6 billion targeted for expansion of the Fort McMurray oilsands.
ÿ Syncrude Canada Ltd., for example, will spend $2 billion over the next five years to develop two new oilsands mines there.
ÿ Chemicals-related projects include a $1.2 billion ethylene plant at Joffre and a polyethylene plant at Prentiss, both involving Union Carbide.
ÿ As well, Northern Border Pipeline Co., 30%-owned by Calgary's TransCanada PipeLines Ltd. is planning an $800-million gas pipeline expansion that will have a powerful impact on Alberta.
ÿ "All these developments will not only boost non-residential construction, but will eventually provide additional markets for Alberta's crude oil and natural gas," said O'Neill.
ÿ "In particular, the new pipeline will ease the current bottleneck in natural gas shipments to the U.S. Midwest, raising capacity by 40 percent." According to O'Neill, that should help close the gap between Canadian and U.S. natural gas prices, with Canadian prices climbing and U.S. prices declining.
ÿ Improved gas prices and strong oil prices are also paying big dividends for the Alberta economy, and will continue in 1997, although O'Neill expects oil prices to moderate next year.
ÿ "When you put those two things together, you've got a fair amount of stimulus and bottom-line stimulus for the drilling and exploration activity."
ÿ The high prices are giving the provincial government greater flexibility through higher royalties that should help create a $1.5-billion surplus this year, said O'Neill.
ÿ Along with the energy sector, Alberta's key agricultural sector, driven by increased overseas demand, is expected to turn in a good performance, although O'Neill foresees some softening in commodity prices.
ÿ "If you look at the way the emerging economies are performing, that's got to be a significant plus for a major agricultural producer." |
