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Alberta eyes Alaska liquids Leaders make case for access to ethane in Arctic gas shipments Gary Park Petroleum News Calgary Correspondent
Alberta’s petrochemical industry is being promoted as a beneficiary of both Arctic gas development and the province’s oil sands sector.
Peter Lougheed, chief architect of the petrochemical business during his time as Alberta premier from 1971 to 1983, made his case at a June 9 conference that northern gas and the oil sands should be part of an “incredible new page” in expanding a chemicals industry that currently employs 8,000 and generates C$7 billion (US$5.2 billion) in annual sales.
He said oil sands products and gas liquids from the Arctic, especially Alaska, could be vital feedstock to build on Alberta’s 25 years of success in building a petrochemicals business.
Conceding he could face a tough fight on both fronts, Lougheed did not know how oil sands operators would react to diverting some of their products to petrochemical plants, but he insisted Alberta should not allow Alaska’s liquids-rich gas to flow past petrochemical plants without “requiring that the ethane be taken out.”
Current Alberta Premier Ralph Klein has already said he will insist on getting a “pound of flesh” through mandatory ethane extraction from any Arctic gas, either North Slope or Mackenzie Delta, that is shipped into or through the province. Constrained ethane threatens petrochemical expansion in Alberta Lougheed’s stand has been bolstered by the findings of a report by energy consultant T.J. McCann & Associates, commissioned by the Alberta Energy Research Institute, warning the Alberta government that constrained ethane supply threatens expansion of the petrochemical industry.
Ethane, once converted into ethylene at four large plants in the province, becomes the essential building block for further chemical productions.
In its latest report on 2002 reserves, the Alberta Energy and Utilities Board said adequate ethane volumes “are available to meet forecast demand, despite a tightening of supplies stemming from the opening of a fourth ethylene plant in fall 2000 and the start of shipments on the Alliance gas pipeline at the end of 2000.”
The board's 2001 reserves report showed Alberta demand for ethane climbing to 289,000 barrels per day, based on all four ethylene plants running at 90 percent of capacity. That is up from the current 220,000 barrels per day, of which 96 percent is used by petrochemical facilities.
Industry sources have previously estimated that Alaska gas could provide about 100,000 barrels per day of ethane, or close to one-third of current Alberta consumption when chemical plants are operating at full capacity.
They have also projected that the Syncrude Canada and Suncor Energy oil sands complexes could provide up to 45,000 barrels per day of ethane equivalent following completion of expansions over the next few years and that could translate into as much as 1.5 billion pounds a year of ethylene. Liquids going to Chicago Over the objections of petrochemical companies, the Alliance line delivers its 40,000 barrels per day of liquids directly to Chicago — enough to support half the needs of another major ethylene operation in Alberta.
The McCann study, including participation by Nova Chemicals, Shell Chemicals Canada and Suncor Energy, has proposed a three-stage C$8.5 billion project to establish a new branch of the petrochemical industry, based on 200,000 barrels per day of synthetic crude and ethylene byproduct from the oil sands.
The complex would produce more than 1 million tonnes a year of ethylene and propylene, along with benzene and para-xylene, both valuable chemical feedstocks. The output would also include small amounts of diesel and jet fuel.
Alberta Energy Research Institute research director Duke du Plessis said the proposal requires an alliance of the government and petrochemical sector to achieve a common vision and long-term strategy, with government help in financing infrastructure, along with royalty breaks on oil sands production and tax breaks to allow a quick write-off of construction costs.
Du Plessis estimated the value of raw bitumen at US$5-$10 per barrel and mined synthetic crude at $20 per barrel, but refining those products into gasoline raises the value to $25-$30 per barrel.
Converting a barrel of bitumen into ethylene, propylene and benzene boosts its worth to somewhere in the $40-$60 range, he said.
Using mined oil sands or bitumen as an alternative to ethane has been the object of a joint industry-Alberta government study that examined the feasibility of a single integrated oil sands upgrader, refinery and petrochemical complex near Edmonton.
Paul Clark, vice president of research and technology for Nova Chemicals, urged the government to put more effort into developing a long-term strategy, including competitive regulatory and permitting processes, by encouraging production of feedstock from oil sands that would make Alberta competitive with the U.S. Gulf Coast.
He said the government could play an important role by promoting the development of technologies to extract the undesirable aspects of synthetic crude and turn them into feedstocks.
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