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Finding a feedstock answer Nova Chemicals, Aux Sable to build Alberta plant to remove gas liquids from Alliance Pipeline as ethane feedstock for petrochemical industry Gary Park For Petroleum News
The Alberta government has notched the first positive response to its incentive plan aimed at building ethane supplies for the petrochemical industry.
And Arctic gas from both Alaska and the Northwest Territories remain tantalizing prospects for additional ethane to keep the province’s chemical manufacturers focused on the long term.
Nova Chemicals and gas processor Aux Sable Canada provided the breakthrough by announcing plans for an extraction plant near Edmonton to produce 40,000 barrels per day of ethane when it comes on stream by mid-2010, adding to the 250,000 bpd currently used in Alberta by the chemical sector.
The facility, expected to cost about C$100 million when the budget is completed, will remove the natural gas liquids currently extracted in Chicago from gas exported by the Alliance pipeline from northeastern Alberta.
It will have the capacity to process up to 1.2 billion cubic feet of gas per day.
Leftover gas liquids — propane, butane and condensates — will be reinjected into the gas stream on the Alliance system for removal in Chicago.
Nova Chief Executive Officer Jeffrey Lipton said that by increasing the recovery of ethane now shipped out of Alberta the project will help position Nova and the rest of the Alberta industry for future growth.
In signing a letter of intent with Aux Sable, which will own and operate the facility, Nova said it believes the plant will remove a bottleneck to expansion of the company’s petrochemical complex at Joffre in central Alberta.
Facility will share site It will be built on the same site as the Heartland off-gas plant currently being built to recover 15,000 bpd of gas liquids from the BA Energy Heartland oil sands upgrader when it starts operations in the second half of 2008.
The Alliance pipeline, which carries an average 1.6 billion cubic feet per day, is jointly owned by Enbridge and Fort Chicago Partners. The same two companies along with The Williams Cos own the Aux Sable
Aux Sable Executive Vice President Tim Stauft said the ethane royalty changes announced last September by the Alberta government did play a role in the development of the project.
Nova said the province’s support of the extraction plant was not critical to its decision, but it welcomed the government’s commitment to pursue additional supplies. Nova executive Val Mirosh said off-gas from oil sands upgraders could provide enough ethane for future plant expansions.
She said Alberta’s position could be further strengthened if it gains access to ethane from North Slope and Mackenzie Delta gas entering the province.
Alberta chemical companies need supply Upset that it was denied a chance to get first rights to gas liquids from the Alliance pipeline in the 1990s, Alberta has made a determined effort to redress that loss, under pressure from chemical companies who have warned that without assured long-term ethane supplies they might be forced to leave the province.
Such a prospect posed a threat to a sector that ships products worth C$6 billion a year out of Alberta and employs 6,500.
Dow Chemical Canada was one of those making a strong case for ethane royalties similar to those used to spur oil sands development. After an exhaustive progress, the government said last year it would introduce an ethane extraction policy to reward those who contributed to incremental production of the gas byproduct, which is a key building block in making polyethylene.
It expects to release details later this year of a credit to be rebated against royalty payments which currently total about C$35 million a year. The policy is seen as a way of trading royalties for greater value.
As one example, Dow has calculated that, depending on the end use, polyethylene can add 12 to 58 times the input value of gas used in the manufacture of the byproduct.
New plant expected
to be significant in jobs, investment
Alberta Energy Minister Mel Knight said that although the absolute benefit of the new plant is difficult to quantify, it will be significant in terms of jobs and investment.
He said value-added upgrading is “very important to us,” pointing to developments in the use of off-gas from oil sands upgraders. Dow’s Canadian President Jeff Johnston said exploiting that gas could lead to new petrochemical plants in Alberta.
He said the off-gas — a mixture of hydrogen and light gases such as propane, butane and paraffin ethane — could be a “large, long-term and stable source of new feedstock,” but it is too early to estimate the volumes that might be available.
A National Energy Board report has calculated that 280 million cubic feet per day of ethane-ethylene could be recovered from the oil sands by 2012.
Johnston said the actual composition will be tied to the technology and design methods used for upgraders.
For Dow, he said feedstock and energy consumes 80 percent of its total production cost, while the remaining 20 percent is a fixed cost.
Other possible sources of off-gas include petroleum coke, gasification of bitumen, coalbed methane and gas liquids from the North Slope and Mackenzie projects if they go ahead, but Dow is holding back on business decisions for the Arctic gas until it becomes “crystal clear” that the projects are going ahead.
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