Alberta ‘back in business’
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Pembina and a Kuwait company join forces to advance C$3.5B petrochemical facility, taking advantage of liquids rich Montney formation
Gary Park for Petroleum News
Alberta is now close to turning the tables after years of ceding petrochemical investment to the United States with an announcement from Pembina Pipeline that it is proceeding with a new C$4.5 billion facility near Edmonton.
In partnership with a Kuwait company, Pembina said the plant will convert 23,000 barrels per day of propane into 550,000 metric tons of plastic products from food containers and consumer electronics to automobile parts.
The word “reaffirms that Canada and Alberta, in particular, have gone back to their place as a globally significant chemical producers,” said Bob Masterson, chief executive officer of the Chemistry Industry Association of Canada, adding “this reconfirms that Alberta is back in business.”
Subject to environmental and regulatory approvals, the facility will start operations by mid-2023, employing 3,000 people during the construction phase and with full-time employment for 200.
Work is already underway on Inter Pipeline’s C$3.5 billion Heartland Petrochemical Complex, also in the Edmonton area.
Royalty tax credits The Pembina project will receive C$300 million in Alberta royalty tax credits, compared with C$200 million for the Heartland venture - both the result of incentives announced by the government of Premier Rachel Notley in late 2016 to spur new energy infrastructure investments.
In addition, Western Canada has an oversupply of propane, resulting from “unprecedented growth in liquids-rich drilling” across North America, Pembina said.
Alberta is currently offering C$2.1 billion in additional loan guarantees, grants and royalty credits to attract new plants, as well as new natural gas midstream projects.
Economic Diversification Minister Deron Bilous said the province has a short list of proposals that he expects to will result in early announcements.
Masterson said his industry is “thrilled” by the Pembina decision which continues a “winning streak in the last 12 months in which we’re seeing over C$8 billion invested in Alberta and over C$10 billion in Canada. We’re now back in the game.”
To those who question the validity of Alberta’s strategy to compete with other jurisdictions, he said the unwillingness in the past by governments to participate caused Alberta to miss out on potential petrochemical developments, such as more than 300 global-scale projects that were drawn to the United States.
US incentives higher Allan Fogwill, chief executive officer of the Canadian Energy Research Institute, said U.S. incentives are higher than Alberta’s, with Royal Dutch Shell’s facility in Pennsylvania scheduled to receive C$1.6 billion over 25 years.
He noted that Alberta did not lead other jurisdictions into the incentive game, “but everyone is playing it.”
Bilous insisted the incentives help level the playing field, without becoming “corporate welfare.”
Abdullatif Al-Farhoud, chief executive officer of Petrochemical Industries Co. of Kuwait, Pembina’s partner, said the deal will help his company add to its long-term supplies of petrochemical feedstock in Alberta.
The propane feedstock will come from the Montney formation, which straddles the northern Alberta and British Columbia border, which RS Energy director Samir Kayane said “has the potential to overwhelm any reasonable demand growth scenario that you throw at it.”
He said the Montney in 2017 and 2018 has added about 22,000 bpd of new propane supply, almost meeting the expected demand of the Pembina plant.
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