Williams on Wednesday clinched a long-term natural gas processing agreement with an undisclosed Canadian oilsands producer that would significantly expand the Tulsa operator's liquids and transportation business.

Under the accord Williams would extract, transport, fractionate, own and market the natural gas liquids (NGL) and olefins recovered from the off gas at the oilsands producer's 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.

"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 in Alberta (AB) 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 total capital expenditures expected for the project is estimated at C$500-600 million. The 2012-2014 portion of the capital expenditures is included in Williams' latest guidance issued in early August. Construction would be funded from cash on hand.

To support the new agreement, Williams plans to build a liquids extraction plant and supporting facilities at the oilsands producer's upgrader. It 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 its oilsands off-gas extraction facilities near Fort McMurray, AB, and to construct a de-ethanizer at its Redwater NGL/olefins fractionation facility near Edmonton (see Daily GPI, March 29, 2011). At that time it was processing off-gas for oilsands heavyweight Suncor Energy.

The propane recovered by Williams under the new 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 is 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. 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.

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