After a year of jumping through regulatory hoops, Canada’s biggest and oldest petrochemical complex, Nova Chemicals, is poised to become a U.S. export customer of unconventional gas and liquids.
Nova fulfilled a potentially tricky condition of approval with the National Energy Board (NEB) for a key item in a C$600 million conversion of its Corunna, Ontario plant to replace naphtha from oil with ethane extracted from natural gas as its raw material and improve its efficiency. Nova has agreements with three U.S. producers for a long-term supply of Marcellus Shale ethane for the Corunna cracker (see NGI, Sept. 12, 2011).
Nova last week completed regulatory requirements for the switch by filing a formal acceptance letter at the NEB from the Ontario Ministry of Culture for the Genesis Pipeline Extension Project, a new import route for ethane from an export point in Marysville, MI.
Genesis initially would deliver about 50,000 b/d of ethane to Sarnia, 180 miles southwest of Toronto, where the Corunna complex has made 30-40% of Canada’s requirements for basic petrochemicals since 1977. Built-in expansion capabilities would enable an eventual 100% conversion to ethane for the site, which uses about 75,000 b/d.
Nova’s contracted supplier, Sunoco Logistics, is committed to obtaining the ethane from producers tapping the Marcellus Shale in western Pennsylvania. The Canadian deal in turn drives Mariner West, sponsored by Sunoco and MarkWest Energy Partners LP. Relationships also have been developed with several Marcellus producers for obtaining ethane imports under a long-term agreement with Caiman Energy LLC. The program also includes an ethane storage agreement with Provident Energy, a Calgary-based counterpart to MarkWest with operations in southwestern Ontario.
Construction of the Genesis and Mariner West pipelines would be coordinated, Nova told the NEB. The petrochemical company’s schedule calls for Genesis to be built and put into service by mid-summer, in step with the conversion agenda for the Corunna plant.
The Genesis line is only 5.5 miles)long, forecast to cost C$17.8 million. But the route traverses a highly sensitive area that attracts keen interest among Canadian, provincial, native and environmental agencies. The regulatory approval process involved seven aboriginal communities with overlapping territorial claims.
The route is near wetlands inhabited by insects, amphibians, reptiles, birds and mammals identified as protected, threatened or endangered by Canada’s Species at Risk Act. The region is prized as a heritage preserve by guardians of Ontario’s native and pioneer roots, as studded with relics of 11,000 years of human development. “Almost all the area demonstrates elevated potential for both prehistoric and historic period archeological sites,” said a study done for the pipeline project.
Ontario’s culture ministry required completion of two archeological surveys and a detailed damage prevention plan before agreeing to requests for acceptance of the pipeline project by the NEB and Nova. Similar assurances that natural features will be protected were required under a screening procedure established for small industrial projects by the Canadian Environmental Assessment Act.
Among Canadian industry and financial analysts, the Corunna ethane conversion project is regarded as early proof of a spreading theory that shale gas and liquids production has potential to revive growth of petrochemical manufacturing across North America.
Nova embarked on the conversion — and expansions of plastics plants that use Corunna’s output — in 2007. The company saw an opportunity emerging when oil prices shot up toward triple-digit peaks at the same time as emerging shale supply surpluses put an end to gas market spikes that caused demand destruction among industrial consumers.
The Genesis pipeline project aroused Canadian counterparts to American protests against fracking. But outrage among eco-puritans was more than offset by the Corunna complex’s 36-year-old role as a mainstay of employment that charted a route to survive and grow while other Ontario manufacturing operations shrank in the global economic contraction. The petrochemical plant and allied plastics operations provide more than 900 well-paid technical jobs, not counting periodic construction work.
“The development of the Marcellus region has changed the supply parameters for natural gas and gas liquids in the Northeast USA and Eastern Canada. The Genesis Project will provide the most efficient, direct physical interconnection…to deliver ethane from the Marcellus,” Nova told the NEB. “The proximity of this new feedstock supply has made ethane economically viable as a feedstock. Access to this feedstock supply is an important opportunity to ensure Nova Chemicals’ continued competitive economic viability in Sarnia, both today and well into the future.”
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