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Pembina, Kuwait Petroleum Unit Evaluating Alberta Petchem Complex

Calgary-based Pembina Pipeline Corp. and a subsidiary of Kuwait Petroleum Corp. (KPC) are evaluating the possibility of partnering on a world-scale combined propane dehydrogenation (PDH) and polypropylene upgrading facility in Alberta.

The joint feasibility study by Pembina and Petrochemical Industries Co. KSC (PIC) "represents an opportunity to develop crucial new market demand for propane" in the province, the partners said. Pembina owns and operates an integrated system of pipelines that transport natural gas and hydrocarbon liquids products produced in Western Canada and North Dakota. It also owns and operates gas gathering and processing facilities, and an oil and natural gas liquids infrastructure and logistics business.

"This project potentially builds on both Pembina's position as the largest supplier to Alberta's existing petrochemical industry, as well as being one of Canada's leading energy infrastructure companies," said Pembina CEO Mick Dilger.

Over the past decade, about 85% of Alberta's propane production has been exported across North America, Pembina noted. Developing infrastructure in the province would "increase local propane demand benefiting Alberta's oil and gas producers, as well as the province, by increasing regional economic activity and tax base."

The Pembina-PIC project as tentatively designed could consume about 35,000 b/d of propane and produce up to 800,000 metric tons/year of polypropylene. The polypropylene would be transported in a pellet form to markets across North America and internationally. Polypropylene is used in, among other things, automobile plastics, medical supplies, home appliances and transparent containers.

"With access to the largest supply of propane in the Western Canadian Sedimentary Basin, Pembina is ideally suited to facilitate the development of this project," management said.

Once its third fractionator is built, it would have more than 200,000 b/d of capacity and control about 60,000 b/d of propane supply in the Fort Saskatchewan area, as well as additional supply originating from Empress, AB.

Pembina and PIC plans to undertake a "detailed technical, financial and commercial study to confirm if the development of the project is economically feasible and aligns with each party's respective investment criteria."

The study is expected to take about six months, with a final investment decision by the middle of 2017. If approved, the project could be in service by 2020.

PIC CEO Mohammed Abdullatif Al-Farhoud said Alberta represented an "attractive market to develop large-scale petrochemical infrastructure, as it is supported by long-term feedstock security, a supportive local government and complements the existing asset base of a number of PIC's and related companies operating in Alberta.

"Moreover, this opportunity further supports PIC's continued efforts in expanding its business portfolio globally. PIC is always in search for exceptional investment and partnership opportunities, especially in the promising regions with advantageous feedstock and market."

KPC’s PIC conglomerate entered Canada’s chief fossil fuel-producing province in 2004 by forming the MEGlobal petrochemical partnership with Dow Chemical Co. The arrangement secured part-ownership of Alberta assets for the state-owned enterprise. A larger investor-controlled international consortium, Equate Petrochemical Co., took over MEGlobal late last year.

KPC kept a separate foothold in the province’s upstream sector by paying US$1.5 billion in 2014 for a 30% stake in a 516-square-mile tract of the Duvernay formation held by a unit of Chevron Corp. (see Shale Daily, Oct. 6, 2014).

In February the provincial government posted a C$500 million ($350 million) reward for natural gas producers to expand petrochemical complexes. A unit of Tulsa-based Williams last month also started up a byproducts facility at its Redwater fractionation facility in Alberta (see Daily GPIMarch 28March 19, 2013).

Williams and Goradia Capital are working on a propylene, plastics and heat-and-power project near Edmonton. The government scheme grants petrochemical plants builders credits against provincial royalties that can be paid for commitments to supply gas and byproducts as raw materials by upstream producers.

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