December 5, 2016 / 6:47 PM / 8 months ago

Alberta petrochemical projects get C$500 mln royalty credits

CALGARY, Alberta (Reuters) - The Canadian oil-producing province of Alberta will offer C$500 million ($377.84 million) in royalty credits to Pembina Pipeline Corp (PPL.TO) and Inter Pipeline Ltd (IPL.TO) for their petrochemical projects, the government said on Monday, as it seeks to diversify its ailing economy.

The provincial government said the companies were the approved applicants of its Petrochemicals Diversification Program, which supports construction of facilities that use propane or methane, components of natural gas, as feedstock to produce materials for products including plastics, detergents and textiles.

Although petrochemical facilities do not pay royalties, the credits they earn can be traded or sold to oil or natural gas producers, who in turn can use them to reduce royalty payments to the government.

Pembina's project is a joint venture with Kuwait's Petrochemical Industries Company and has been approved to receive up to C$300 million in royalty credits to build a propylene-polypropylene facility, Minister for Economic Development and Trade Deron Bilous told reporters in the province's capital of Edmonton.

The project by Inter Pipeline, which would process propane into propylene, has been approved to receive up to C$200 million in royalty credits, he said.

"Once these two projects are up and running, they will support more than 1,400 direct and indirect fulltime jobs," Bilous said, adding the facilities will be operational in 2021.

There are no plans to extend the program, according to a government statement.

Alberta is the largest source of U.S. oil imports and its previously booming economy has been hard hit by the global crude price slump, with companies slashing billions of dollars in capital spending and laying off tens of thousands of workers.

This year the left-leaning provincial government unveiled a review of energy royalties that left rates unchanged on existing oil wells and oil sands projects, and avoided adding more cost burdens to an industry already reeling from the lowest crude prices in more than a decade.

($1 = 1.3233 Canadian dollars)

Reporting by Ethan Lou in Calgary, Alberta; Editing by Alan Crosby and Matthew Lewis

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