Williams has clinched a long-term natural gas processing agreement that expands its Canadian natural gas processing volumes by 60% and opens the door to a growing petrochemical business.
Under the accord Williams would extract, transport, fractionate, own and market the natural gas liquids (NGL) and olefins recovered from the offgas for an undisclosed oilsands producer and an upgrader near Fort McMurray, AB. The NGL/olefins recovered are expected to total about 12,000 b/d by mid-2015 and 15,000 b/d by 2018.
To support the expansion, Williams plans to invest US$500-600 million at its Redwater facilities in Alberta. A liquids extraction plant and supporting facilities would be built at the oilsands producer's upgrader. Williams also plans to extend its Boreal Pipeline to transport the NGL/olefins mixture to its expanded Redwater facility near Edmonton. Last year Williams spent C$311 million to modify the off-gas extraction facilities and to construct a de-ethanizer at the Redwater NGL/olefins fractionation facility (see NGI, April 4, 2011). At that time Williams was processing off-gas for oilsands heavyweight Suncor Energy.
"This new agreement will build on the unique expertise and large scale infrastructure we've built in Canada," said Williams Energy Canada President David Chappell. "The scale that we are building here -- with fractionation, distribution and storage -- gives us the ability to generate significant long-term incremental value from our operations. The new operations will also further reduce greenhouse gas and sulfur dioxide emissions from the upgraders' oilsands operations and produce valuable commodities that were previously being burned."
Williams' Redwater facilities would fractionate the liquids and olefins into an ethane/ethylene mix, propane, polymer grade propylene, normal butane, an alkylation feed and condensate. The ethane price risk associated with the deal is mitigated via a previously announced long-term agreement to supply Nova Chemicals Corp. with up to 17,000 b/d of ethane and ethylene.
The propane recovered by Williams under the latest long-term contract is to be sold into the local market and potentially would to be used as feedstock at Williams' proposed propane dehydrogenation (PDH) facility in Canada. The other products would be sold into the established markets where Williams sells existing NGLs and olefins produced in Canada.
Williams had said in July it was drawing up plans to build the first PDH facility in Canada to give it room to increase its polymer-grade propylene production to serve a growing petrochemical market (see NGI, July 30). Williams currently is the only company in Canada that produces polymer-grade propylene, used as a feedstock in plastics manufacturing. As designed, the proposed PDH facility, with an annual capacity of about 1 billion pounds, would be built at Williams' Redwater facility for about C$600-800 million to convert propane into propylene, which would be transported to to the U.S. Gulf Coast. The associated hydrogen byproduct would be sold in the Alberta marketplace.
The deal is "clearly positive" for Williams, said Tudor, Pickering, Holt & Co. "Outsized margins result from barriers to entry -- Williams is the only processing prover to upgraders -- plus favorable commodity exposures: short-AECO gas, long-NGLs and high-value olefins. Additional propane production allows Williams to source proposed Canadian PDH facilities with nearly 100% Williams volumes. PDH is another large, low-multiple project ($700 million) [that is] taking advantage of Williams' unique Canadian footprint."
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