Canada has been facing a similar situation to the U.S. in recent years in which the production of natural gas liquids, such as propane, has been rising sharply thanks to a focus on liquids-rich gas wells in unconventional gas plays. In response to the rising bounty of propane, infrastructure development in Canada has focused on export projects, and in 2019, the completion of the new Ridley Island Propane Export Terminal in British Columbia enabled the first overseas exports of propane from Canada’s west coast, allowing Western Canadian producers to access destination markets beyond just the U.S. for the first time. Later this year, Pembina Pipelines, a developer of energy infrastructure projects across Western Canada, will complete a new propane export terminal just outside Prince Rupert, BC, further boosting propane exports to overseas markets. Today, we take a closer look at propane supply issues, Pembina’s new propane export terminal and recently announced plans to further expand the terminal’s export capacity.
The shift to more unconventional oil and natural gas plays in North America over the past decade has generated significant production increases in all forms of hydrocarbons. Crude oil, natural gas and natural gas liquids (NGLs), which includes propane, have all been hitting record or near-record levels in both the U.S. and Canada. This has forced markets in both countries to find more outlets for their growing output, both domestically and overseas.
Although the U.S. dealt with the rising volumes of NGLs by increasing overseas exports earlier in the 2010s (and continues to do so), Canada has only had to grapple with this problem since the beginning of 2016, when a shift to more liquids-rich natural gas plays, primarily the Montney and Duvernay in Alberta and British Columbia, began to produce significant additional amounts of propane, normal butane and other liquids (condensate, or natural gasoline, being a favorite). We explained the economic drivers behind this shift to more liquids-rich gas wells in our seven-part series Get Me Out of Here, and the results of this increased focus are readily apparent in the rise of Western Canada’s propane supply, the subject of today’s blog (see Figure 1).
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