Several new propane dehydrogenation (PDH) plants are coming online along the U.S. Gulf Coast. Now developers in Alberta are making plans for the province to become the next hot spot for PDH plant development. Final Investment Decisions (FIDs) are due over the next year or so on two projects aimed at taking advantage of the increasing volumes of propane being produced in western Canada—propane so plentiful, in fact, that they are paying to have it hauled off. But what if propane prices rise due to increasing U.S. demand, more exports and lower U.S. production? What might such developments do to PDH economics? What could make Alberta different? Today, we consider the drivers behind two (maybe three) prospective PDH projects in Alberta, and look at how they may affect the propane market on both sides of the 49th parallel.
We try not to play favorites among the hydrocarbon markets we blog about, but it’s hard not to like the propane sector, with its dynamic pricing, its variety of uses (heating, BBQ grilling, petrochemical feedstocks), its huge export potential, and the sometime remarkable differences between how much it costs at Point A versus Point B. As we have explained, propane is a “purity” product extracted from natural gas along with the other NGLs or (in smaller volumes) produced at refineries. Propane has three carbon atoms and eight hydrogen atoms (C3H8). We’ve written about propane frequently, and about propylene, a very in-demand petchem intermediary feedstock that for a long time was produced primarily by refineries or as a byproduct from ethylene steam crackers but more recently is increasingly being made “on purpose” at propane dehydrogenization (PDH) plants. As their name suggests, PDH plants remove some hydrogen (specifically, two hydrogen atoms) from propane (again, C3H8) to make propylene (C3H6). In Son of a PDH Man, we explained that the propylene molecule is significantly more reactive than propane, making it an ideal chemical building block. Propylene is used in downstream petrochemical processes to make films, packaging and synthetic fibers. About two-thirds of propylene is used to make polypropylene--one of the best-selling plastics, second only to polyethylene. Polypropylene is used extensively in automobiles and in the manufacture of packaging films, bottle caps, fiber ropes as well as bicycle helmets and disposable diapers.