National Post (National Edition)
Inter to build $3.5B plastics project
‘GREAT’ FOR ALBERTA
GEOFFREY MORGAN CALGARY • In a boost to Alberta’s beleaguered energy industry, Inter Pipeline Ltd. said it will spend $3.5-billion on Canada’s first propane-toplastics petrochemical plant.
The announcement that a major new energy project will be built is welcome news in Alberta, which has seen a raft of pipelines and natural gas export plants delayed or cancelled, amid a three-year downturn in oil prices.
Starting next month, Inter Pipeline will spend the next four years building a propane dehydrogenation and polypropylene (PDH-PP) facility, which will take 22,000 barrels of propane per day and convert it into 525,000 tonnes per year of “polymer grade” plastic pellets.
The pellets are used to build every day consumer plastic products such as bottles and toys.
“This is a whole new value chain for Canada,” David Chappell, company senior vice-president, said Monday, adding that there are currently no petrochemical plants in Canada that use propane as a feedstock.
Canada’s current fleet of petrochemical plants, located mainly in Alberta and Ontario, use ethane to create plastics or methane to produce methanol, but the country imports thousands of tonnes of propylene pellets every year.
Chappell said the PDH-PP facility would help reduce Canada’s trade deficit for propylene and eventually create other opportunities for chemical plants that produce propylene-glycol, which is used as de-icing fluid for airplanes, or super-absorbent polymers, used in diapers.
There is an abundance of low-cost propane in Western Canada and low-cost natural gas and electricity, which helped drive down the project’s expected operating costs, apart from readilyavailable labour due to the lean times in the construction industry, which has helped reduce costs, Chappell said.
“Not much is happening in Alberta when it comes to construction and so we’ve got very competitive capital costs right now,” Chappell said.
Mark Pinney, manager of markets and transportation for the Canadian Association of Petroleum Producers, said the project comes as “a relief” after a string of project cancellations. “It improves the overall economics for natural gas wells,” he said.
Gary Leach, president of the Explorers and Producers Association of Canada, said the decision was “great news” for Alberta and natural gas producers in Western Canada.
“Based on some disappointing decisions around West Coast LNG facilities for example, you can get all the approvals and still have the company decide not to give it that final investment sanction,” Leach said. “We used to think multi-billion-dollar projects were just regular, weekly occurrences in Alberta for many years and I think we just took them for granted, so it’s nice to see this scale of investment.”
Both Leach and Pinney praised Alberta’s NDP government for providing $200 million in royalty credits to help make the project more competitive against similar U.S. petrochemical complexes on the Gulf Coast.
“We’re excited to see this new investment that will create thousands of goodpaying jobs and help diversify Alberta’s economy,” Alberta Energy Minister Marg McCuaig-Boyd said in a release.
The project will create 13,000 direct and indirect jobs during construction, Chappell said, and require 180 people to operate once it’s complete.
The government has also awarded royalty credits to Inter Pipeline competitor Pembina Pipeline Corp. for its proposed propane-to-plastics facility, and an announcement is expected next year.
In addition, Pembina and AltaGas Ltd. have both announced liquefied propane gas (LPG) export terminal projects near Prince Rupert, B.C. to send propane produced in Western Canada to foreign markets.
The two LPG export terminals and Inter Pipeline’s petrochemical project represent incremental demand of 87,000 barrels of propane per day.