Low natural gas prices a lure for petro producers

CALGARY • With the world’s most depressed natural gas prices, Alberta’s producers are struggling to stay in business.

But low prices are also a magnet for petrochemical producers, who are planning big investments in the province and helping it realize its long-standing priority of adding value to its oil and gas resources.

David Chappell, president of Williams Energy Canada, a subsidiary of Oklahoma-based Williams Companies Inc., said low gas prices and provincial incentives are making Alberta an attractive place and getting attention of global petrochemical players. Williams has just completed a $500-million project in Fort McMurray to convert off gas from Suncor Energy Inc.’s oil sands project into ethane and ethylene, which will be further processed by Nova Chemicals Corp. at its Joffre facility into plastic products.

It’s great to produce a high-value product that is easier to export

Williams is also spending up to $600-million to remove ethane and ethylene, propane and propylene from off gas produced in Canadian Natural Resources Ltd.’s Horizon oil sands plant. And it’s spending a further $900-million for a propane dehydrogenation facility to convert propane into propylene.

Off gas is a byproduct of oil sands upgrading that is usually burned as a fuel. While there is plenty of natural gas available in deposits across the province, oil sands plants provide more stable supply that helps justify long-term petrochemical investment. A further benefit of off-gas processing is that it reduces emissions of greenhouse gases from the oil sands. The processes are “about getting more value out of the resources, rather than burning them as fuel, and turning it into plastic pellets, which also gives fantastic market access,” Mr. Chappell said in an interview.

“We talk so much about world wide market access [for oil and gas]. Plastic pellets are ideal, because you can get those on container ship and ship anywhere in the world.”

Mr. Chappell said the low cost of feedstock more than offsets the high cost of building in Alberta, where the labour market is tight due to oil sands-related construction.

But Mr. Chappell said even petrochemical producers get concerned when natural gas prices are unsustainably low and he hopes increased demand from petrochemical players will smooth out fluctuations.

“If we can add more value to the products we produce here, hopefully we can get away from some of the cyclicality and get more sustainable tax revenue,” he said. “I believe it’s the way Alberta should be going. It’s great to produce a high-value product that is easier to export.”