Construction approval was awarded last Thursday to a Canadian ethane import pipeline project rooted in expectations that Alberta natural gas supplies will continue to deteriorate.

When completed this fall, Vantage Pipeline will transport up to 40,000 b/d of ethane from northwestern North Dakota to a link with a products delivery web serving central Alberta petrochemical plants. The ethane will be extracted from gas production at a Hess Corp. processing plant at Tioga, as a side benefit to development of the Bakken oil formation. The project also includes partners New York City-based Riverstone Holdings LLC and private Calgary energy infrastructure firm Mistral Energy.

For C$240 million (US$ at par), the new conduit will span 578 kilometers (360 miles) of Saskatchewan and Alberta, mostly along established pipeline and road rights-of-way across sparsely populated, dry plains. The facilities will be installed with built-in capacity to raise deliveries eventually, as required, to 60,000 b/d by adding pump stations.

In approving Vantage, the National Energy Board (NEB) noted that North Dakota authorities report the state’s gas production has risen to a record high exceeding 280 MMcf/d as a side-effect of the Bakken oil drilling boom.

Bakken output is forecast to double soon to about 450,000 b/d, driving North Dakota gas production up to about 500 MMcf/d over the next four years. The gas flows associated with Bakken production are estimated to average 20% ethane, making them an exceptionally rich source of the raw material for petrochemical plants.

Although best known for oil and gas exports, Alberta is also Canada’s biggest petrochemical-producing jurisdiction, with plants supporting about 7,500 exceptionally well-paying technical jobs and earning annual revenues of C$15 billion including C$7 billion in international exports.

Evidence before the NEB showed that home-grown ethane supplies for the Alberta plants are 35,200 b/d below their total capacity to use 250,000 b/d. The shortfall is forecast to increase to 76,500 b/d as of 2016 and keep on growing to 85,100 b/d by 2020.

The developing ethane shortage is blamed on depletion of Alberta conventional gas fields, limited interest in developing shale supplies due to soft prices, a switch in drilling targets to tight oil using shale gas technology, and rising industrial gas consumption by northern thermal oilsands extraction projects.

In approving the Vantage ethane import pipeline, the NEB said it is “aware that Alberta’s petrochemical industry is a very important contributor to the Alberta and Canadian economy, and recognizes the impact of the current and future ethane shortage in terms of lost value for the province and for Canada.”

The approval also said the NEB “accepts as reasonable the view that the decline of ethane production in Alberta will continue for some time as increased competition with U.S. shale gas, new U.S. pipelines and relatively low gas prices in North America could negatively impact the Western Canada Sedimentary Basin gas production.”

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