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CALGARY, A.B. – A $4.5-billion Alberta project to turn propane into plastic will help deliver world prices to land-locked western Canadian oil and gas producers, says Calgary-based Pembina Pipeline Ltd.
The company announced Monday it has decided with its joint venture partner, Kuwait’s Petrochemical Industries Co., to go ahead with their proposed integrated propane dehydrogenation plant and polypropylene upgrading facility northeast of Edmonton.
The plants’ plastic pellets will be sent by rail and shipping containers to manufacturers around the world to be turned into recyclable products used in automobiles, medical devices, food packaging and home electronic appliances.
“Sanctioning of the PDH/PP facility is the largest step taken to date by Pembina in executing its strategy to secure global market prices for customers’ hydrocarbons produced in Western Canada, and provides another exciting platform for future growth,” said Pembina CEO Mick Dilger in a news release.
Petrochemical Industries CEO Mohammed Abdullatif Al-Farhoud added in the same release that the facility is “ideally aligned with PIC’s continued pursuit of sustainable and globally diversified growth.”
Pembina was awarded $300 million in royalty credits in 2016 as an Alberta government incentive for the project.
At the same time, Calgary-based Inter Pipeline Ltd. got $200 million in credits for its nearby $3.5-billion polypropylene project, which is now under construction.
The credits allow producers to reduce their royalty payments to the government and, as such, can’t be claimed by the petrochemical plants themselves.
However, Pembina said Monday it has made agreements with producers to “monetize” 80 per cent of the credits over the first several years of operation of the facility, which is expected to be in-service in mid-2023.
Pembina’s share of the project’s capital costs will be $2.5 billion including a 50 per cent interest in the joint venture, which will own the plants, and a 100 per cent stake in the supporting facilities.
The plants will be located next to Pembina’s Redwater fractionation complex, which extracts liquids such as propane, ethane and condensate from natural gas.
They will consume about 23,000 barrels per day of propane and have nameplate capacity of 550,000 tonnes of polypropylene per year.
The project is part of a resurgence in spending on industrial chemical industry projects in Canada. A recent members survey by the Chemistry Industry Association of Canada projected capital spending would jump by 65 per cent to $1.9 billion this year, the highest since $2.2 billion in 2014 and third-highest in a decade.
The survey suggested employment would rise by about four per cent or 640 jobs to 17,670 in 2019.
Last year, Alberta announced two new programs worth $2.1 billion in royalty credits, grants and loans to encourage more investments in manufacturing plants, as well as facilities to produce petrochemical feedstock. The applications deadline was Oct. 1 and announcements are expected soon.
The new plants are opposed by environmentalists who point out very little plastic is recycled in Canada, almost 90 per cent winds up as litter or in landfills.
But Alberta’s NDP government says upgrading hydrocarbons at home instead of shipping raw product into the United States allows the province to ensure it has among the lowest emitting petrochemical producers in the world.
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