Things Can Only Get Better - At Long Last, New Outlets For Alberta Propane

Well, it finally happened. After several years of assessing the possible development of a large, integrated propane dehydrogenation (PDH) plant and polypropylene (PP) upgrader unit, a joint venture of Canada’s Pembina Pipeline and Kuwait’s Petrochemical Industries Co. (PIC) earlier this week announced a final investment decision (FID) for the multibillion-dollar project in Alberta’s Industrial Heartland. The new PDH/PP complex won’t come online until 2023, but when it does, it will provide yet another new outlet for Western Canadian propane, which has been selling at a significant discount in recent years. Today, we discuss Pembina and PIC’s long-awaited PDH/PP project, Inter Pipeline’s development of a similar project nearby, Western Canadian propane export plans — and what they all mean for propane prices.

The song-based title of our 2016 blog on Western Canadian propane — Stuck in the Middle With You — summed up the situation well: producers in the Western Canadian Sedimentary Basin (WCSB) were producing increasing volumes of propane but were having a harder and harder time finding markets for the NGL “purity product.” For one thing, Kinder Morgan’s Cochin Pipeline, which for many years had transported as much as 60 Mb/d of propane from Edmonton, AB, to Windsor, ON, in March 2014 was reversed to move condensate — used as a diluent to blend with bitumen produced in the Alberta oil sands — from Kankakee, IL, to Edmonton. (With Cochin no longer a propane-takeaway option, propane has needed to move out of Alberta by rail — a higher-cost alternative to pipelines.) Also, rising production of propane in the U.S. was nibbling away at a primary market for Western Canadian propane — namely, customers south of the 49th Parallel (the U.S.-Canada border out west).

In that same blog, we also discussed two possible fixes to Alberta propane producers’ conundrum: (1) transport propane westward by rail to British Columbia, where it could be loaded onto ships and sent to Asia and other overseas markets, and (2) build PDH/PP complexes in Alberta and supply them with regionally produced, price-advantaged propane. Three years ago, both the Pembina/PIC joint venture and Inter Pipeline were hemming and hawing about whether to commit to building a PDH/PP project. Now, both have: Inter Pipeline made its FID in December 2017 and, as we said in today’s intro, the Pembina/PIC team — known (logically enough) as Canada Kuwait Petrochemical Corp. (CKPC) — announced its FID this past Monday, February 4 (2019).

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