Upgrading bitumen in Alberta best option, labour group says

The Alberta Federation of Labour says documents obtained through Freedom of Informationshow that the provincial governmenthas been told thatupgrading bitumen in Alberta is a better financial option than sending it elswhere.

"The government's own experts, the government's own analysis, is showing clearly that it makes more sense to upgrade our bitumen rather than send it down the pipeline to places like the United States and China," said AFL president Gil McGowan.

However, multi-billion dollar price tags and labour shortages make upgraders challenging to build in Alberta and there are signs the industry doesnt believe they are economically viable.

Suncor has announced that it is reviewing and may consider indefinitely deferring or cancelling the Voyageur upgraderproject in northern Alberta.

"If you want a canary in the mine shaft about the market incentives for upgrading, the decision by Suncor regarding Voyageur is that canary in the mine shaft," said University of Alberta business professor Mike Percy.

Percy thinks Suncor may be taking into account the effect of projects like the proposed East-West, Northern Gateway or Keystone XL pipelines.

He said that margins for upgrading may look good now, but he believes the price differential for western Canadian oil will return to historic levels over the next couple of years.

"It would make it very, very unlikely that an upgrader could be profitable," Percy said.