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New Petrochemical Plants Look to Tap Canadian Natural Gas Supply

A target date of 2021 has been set to complete a petrochemical plant for 22,000 b/d of propane from Alberta natural gas producers.

After four years of engineering studies and a financial boost from the provincial government, Inter Pipeline Ltd. announced a 2018 start on three years of building a C$3.5 billion ($2.8 billion) plant to make 525,000 tons/year of polypropylene.

The government contributed C$200 million ($160 million) in credits against provincial gas and byproducts royalties. The aid, part of provincial economic diversification programs, enables the petrochemical firm to swap the credits for supply and price commitments by producers.

Inter Pipeline’s long-awaited investment commitment won applause from the Canadian Association of Petroleum Producers, the Explorers and Producers Association of Canada and Alberta Energy Minister Margaret McCuaig-Boyd.

Gas producers and the government are still awaiting a construction decision on a second and bigger project that has also been offered royalty credits.

Pembina Pipeline Corp. and subsidiary of Kuwait Petroleum Corp., Petrochemical Industries Company KSC., are working on plans for a plant that would use 35,000 b/d of propane to make 800,000 tons/year of polypropylene.

Propane supplies are growing in Alberta and British Columbia (BC) as horizontal drilling and hydraulic fracturing spread in their liquids-rich Montney and Duvernay unconventional gas formations, stimulating a series of projects.

With current Canadian propane production estimated at 153,000 b/d, Pembina and Altagas Ltd. are building expert terminals on the northern Pacific coast of BC. As a light and “clean” item, the natural gas byproduct is exempt from a ban that the national Liberal government imposed on crude oil tankers earlier this year.

Alberta petrochemical project sponsors expect production growth, as well as the provincial government’s royalty credits, to keep propane prices low enough for new plants to survive in international manufacturing competition.

Inter Pipeline’s new plant and the larger version proposed by Pembina are Canada’s first entries into propane-based synthetic materials. Petrochemical plants built to date in Ontario and Alberta use ethane and oil for other end-products.

Pembina management has told its stockholders that propane-based manufacturing has potential to generate strong gains for Canadian gas, petrochemical and plastics producers. According to a company presentation, “the polypropylene would be transported in a pellet form to markets across North America and internationally. Polypropylene is one of the world's most commonly used polymers. Traditional uses include automobile plastics, medical supplies, home appliances, transparent containers as well as numerous other applications.”

Alberta government officials will be able to watch progress on the results of the royalty credits program. Inter Pipeline’s plant, which would be called the Heartland Petrochemical Complex, is named after the industrial district where it is to be built on the eastern fringe of the provincial capital, Edmonton.

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