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(Propane) Double Vision - An Update on Alberta's Two PDH-PP Plants and Their Appetite for Propane

In the past three years, two major commitments were made to construct propane dehydrogenation and polypropylene plants in Alberta to take advantage of the rising bounty and generally low cost of propane supplies in Western Canada. Two Calgary-based midstream companies, Inter Pipeline Ltd. and Pembina Pipeline, each started developing PDH-PP plants in Alberta’s Industrial Heartland area northeast of Edmonton. But then came COVID-19, which set back the timeline for one of the projects and put the other on ice. All this comes as Western Canada’s propane market is in greater flux than usual, and facing a tightening supply/demand balance as exports to Asia ramp up. Today, we provide a status check on the development of these two plants, and what the increase in demand might portend for propane balances in the next few years.

The increased role of unconventional oil and gas plays in Western Canada in the past decade has resulted in substantial growth of NGL supplies, including propane — too much propane, it often seemed. To make fuller use of burgeoning propane supply, Alberta’s provincial government in December 2016 initiated a royalty incentive program to promote investment in projects that would upgrade propane into value-added products. Taking advantage of abundant low-cost propane supplies and the government’s royalty incentives, two projects eventually came forward: one by Inter Pipeline Ltd.’s (IPL) Heartland Petrochemical Complex (HPC) and the other by a joint venture of Pembina Pipeline and Kuwait Petroleum Corp. (KPC). Both plants rely on the process of propane de-hydrogenation (PDH) to create polypropylene (PP), a primary chemical building block for everyday products such as automotive parts, plastic containers, and reusable shopping bags. If you love inorganic chemistry, the basic steps behind this process are explained in Things Can Only Get Better.

It has been nearly a year since we last discussed details of these two projects in Living In the Plastic Age, and, since then, both have advanced in varying degrees. In this blog, we provide an update on the projects, including when they will begin operations and what their combined propane demand might portend for Western Canadian propane balances. We’ll start with IPL’s HPC project.

In December 2017, IPL announced a final investment decision (FID) for the project, to be located in Strathcona County just northeast of Edmonton — an area often referred to as Alberta’s Industrial Heartland (hence the name, Heartland Petrochemical Complex). Originally budgeted at C$3.5 billion (US$2.7 billion), HPC will be Canada’s first PDH-PP facility, consuming 22 Mb/d of propane and producing about 525 thousand tons per annum (Mtpa) of PP. In addition to exporting PP, primarily to the U.S. Midwest, HPC also is meant to lessen Canada’s near-100% dependence on imported PP, chiefly for Alberta’s numerous petrochemical plants.

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