Canadian natural gas producers have been granted a liquid byproduct growth entitlement with a lifespan of up to a quarter-century. The third propane export license granted by the National Energy Board (NEB) raised the total volume allowed for foreign sales over 25 years to 1.6 billion bbl to be shipped out at a brisk pace of as much as 222,000 b/d.
Petrogas Energy Corp. obtained a license for propane exports of 390 million bbl at a rate of 107,000 b/d for 10 years, commencing when shipments begin. Since mid-2016 the NEB also awarded smaller but longer, 25-year export authorizations for 787 million bbl or 75,000 b/d to Pembina NGL Corp. and 420 million bbl or 40,000 b/d to AltaGas LPG.
If fully used, the export licenses would enable gas suppliers to double Canadian propane production. Growing sales are forecast to support spreading horizontal drilling and hydraulic fracturing into liquids-rich sweet spots in the Montney and Duvernay shale formations under northern British Columbia and Alberta.
AltaGas, Pembina and Petrogas are Calgary midstream companies with expanding networks of processing plants, pipelines, storage and shipping terminals, and arrangements with gas producers. A prompt start is being made on using the export entitlements obtained from NEB.
AltaGas announced a final favorable investment decision to start construction of a C$400-500 million (US$300-375 million) terminal, for loading 20-30 propane tankers per year on BC’s northern Pacific coast near Prince Rupert on Ridley Island.
The Petrogas export license allows land and sea shipments from 23 cross-border exits including Ridley Island. AltaGas holds part-ownership of Petrogas. The pair own a propane export dock called Ferndale on Washington state’s Pacific coast at Anacortes. Pembina is looking for tanker export sites after scrapping plans for an Oregon Pacific coast terminal because environmental and community resistance prompted Portland’s city government to withdraw a site agreement.
Delays and doubts about 20 liquefied natural gas (LNG) export projects on the Pacific coast of BC prompted NEB to grant Petrogas only 40% of its request for a 25-year license to ship out 976 million bbl of the liquid byproduct. The board’s ruling said, “There exists an uncertainty about Canadian propane supply beyond ten years on account of natural gas supply, and therefore, propane supply, being heavily influenced by the uncertainty of West Coast LNG exports.”
The export licenses and the AltaGas decision to build a Pacific Coast tanker terminal add up to the third boost received for propane by Canadian gas producers.
Keyera Corp. and Plains Midstream Canada recently completed railway terminals for propane with a combined capacity of 85,000 b/d near the Alberta capital of Edmonton, enabling increased exports as well as domestic sales to replace imports.
The Alberta government awarded C$500 million (US$375 million) in royalty credits to two petrochemical projects, for use in arranging propane supply contracts.
The value of the gas byproduct rose sharply as the delivery system and sales opportunities expanded over the past 12 months, according to a “market snapshot” survey compiled by NEB staff. During 2016, “Propane prices in Edmonton increased from a monthly average of 0.1 U.S. cents per gallon in January to 52.0 U.S. cents per gallon in December; the highest price observed since November 2014,” the snapshot review observes.
“Edmonton propane traded at an average of 22.5 U.S. cents per gallon in 2016, 16.6 U.S. cents per gallon, or 281%, over 2015.” NEB added that the “recent developments could result in additional demand for western Canadian propane and sustain prices in the years ahead.”