From the Beginning - U.S. Ethane Squeezing Out Canadian Propane/Butane in Sarnia

The availability of vast amounts of ethane from the nearby “wet” Marcellus and Utica plays is spurring a petrochemical rejuvenation in Sarnia, ON. Two years ago NOVA Chemicals stopped using naphtha as a feedstock at its 1.8 billion pound/year ethylene plant in Sarnia’s Chemical Valley and now relies on a combination of ethane, propane and butane. Next year the company is planning to complete the plant’s conversion to 100% ethane and is considering the possibility of building a big polyethylene plant nearby. Today, we continue our comprehensive review of southwestern Ontario’s NGL, petchem and refining infrastructure, including Sarnia’s NGL fractionation, storage and end-use markets.  

As we said in Part 1 of this series, Sarnia has been a major player in crude oil, refining and petrochemicals for well over a century. An 1858 oil well in nearby Oil Springs, ON is said to have been the first on the continent, and over time, oil-production, refining and petchem infrastructure was developed in southwestern Ontario (as were pipelines and railroads). Sarnia’s role as a major refining/petchem player continues to this day, decades after most oil production in southwestern Ontario dried up. In Part 2, we looked at the crude oil side of things, describing the three refineries in Chemical Valley, the oil pipelines that supply them, and the petroleum-products pipelines that help move the refineries’ output to market. In today’s episode, we turn to Sarnia’s important NGL sector: the pipelines that transport purity ethane and mixed propane/butane to Chemical Valley, the fractionator that separates mixed NGLs into purity products, the NGL storage facilities, and the big ethylene plant that “cracks” ethane, propane and butane into ethylene –– a critically important petchem building block.

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I Saw Miles And Miles Of Texas - Part 4: Texas Natural Gas Pipeline Flows, Capacity And Pricing

Natural gas exports out of Texas are changing everything. Pipelines built to move gas up the Texas coast are being reversed and expanded to allow southbound flow. Texas gas exports will soon be rising fast, and within two or three years Texas will flip from being a net producing region to (with exports) a net demand region. To help pull in the gas Texas will need from the Marcellus/Utica and elsewhere, the basis at the Agua Dulce hub, a key pricing point for the South Texas gas market, is likely to shift from being lower than Henry Hub to being higher.

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Sarnia is located near the southern tip of Lake Huron, just across the St. Clair River from southeastern Michigan. The city is within what you might call a petchem/marketing sweet spot, in that (from a feedstock-sourcing perspective) it is close to the NGL-rich wet Marcellus/Utica region (eastern Ohio, western Pennsylvania and northern West Virginia) and (from a market perspective) it is within 500 miles of half the population of North America –– in other words, close to a few hundred million people who use all kinds of ethylene-based plastics and other products. Sarnia also has a century’s worth of pipelines, refineries and other supportive infrastructure, most of which have undergone major upgrades and changes in recent years in response to tightening environmental regulations and –– just as important –– major developments such as the recent boom in NGL production in the Marcellus/Utica across Lake Erie. Sarnia also has geology on its side; southwestern Ontario and nearby southeastern Michigan sit atop subsurface salt formations that allow for the creation –– or “washing” –– of huge underground storage caverns that are ideal for storing NGLs and petrochemicals (see Smoky and the Salt Caverns).

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