The Ridley Island Propane Export Terminal — Canada’s first propane export facility — has been a game changer since it started up in May 2019. Located along the coast of British Columbia, RIPET has been shipping record amounts of propane to Asian markets in recent months, just as Western Canadian propane production has been sagging due to the twin pressures of crude oil price weakness and COVID-19-related disruptions. With production down, RIPET gradually ramping up its export capacity, a second export terminal poised to come online nearby, and Canadian demand for propane holding steady, something has to give, right? Today, we examine the changing supply/demand outlook for Western Canadian propane, and what it might mean for railed exports to the U.S.
Western Canada, the primary source of Canada’s propane supplies and exports, for many years has had a single direct export market for its excess propane supplies: the U.S. That changed 15 months ago, when AltaGas and Vopak’s jointly owned RIPET export facility in Prince Rupert, BC, began operations, providing Canada with its first access to Asian markets from its own shores. As we explained in Part 1 of this series, prior to RIPET’s start-up, Canada did have an indirect means of sending propane to Asia, namely by railing supplies down to the PetroGas-operated export terminal in Ferndale, WA. With firm delivery contracts in place for both of these terminals, propane exports have been running at strong levels in recent months — record levels, in RIPET’s case. The larger volume of propane being sent to Asia appears to have eliminated the typical seasonal excess of propane supply in Western Canada for the first time ever, and to have partly eroded propane-by-rail exports to the U.S., with multi-year lows being recorded in May.
As we mentioned in Part 1, another propane export terminal near RIPET — Pembina Pipeline’s 25-Mb/d Prince Rupert terminal — was originally slated to begin commercial operations in the third quarter of 2020. With the convulsions of the energy markets earlier this year, Pembina announced in May that the start-up had been delayed to the first quarter of 2021, and had earlier announced in March that a recently sanctioned 15-Mb/d expansion of the terminal, originally timed for 2023, would be deferred indefinitely. So, in the not-too-distant future, Canada will have two operating propane export terminals on its west coast, with nameplate export capacity at 75 Mb/d: 25 Mb/d from Pembina/Prince Rupert and 50 Mb/d from RIPET. And our understanding is that RIPET’s co-owners plan to increase that terminal’s throughput by 5 to 10 Mb/d annually until they reach its ultimate capacity of 80 Mb/d.
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