INSIGHT: Alberta's petchems advantage

03 April 2008 17:43  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--Feedstock-rich Alberta looks likely to attract more chemicals production.

Companies have tapped into supplies of advantaged ethane for years but with development of Canada’s natural gas and oil sands potential more ethane and alternative feedstocks will become available.

The province has a well developed upstream petrochemicals sector with NOVA Chemicals the key player. Plans are being developed now to introduce production of a more diversified range of chemicals, primarily, perhaps, from synthesis gas.

The province is also looking into more downstream chemicals processing.

Nova signed a letter of intent last August with pipeline company Williams to process off-gases from oil sands processing.

Such streams have the potential to add as much as two-thirds to Alberta’s current output of ethane of 250,000 bbl/day, it estimates.

Gas from Alaska too could be yielding a further 150,000 bbls/day of ethane alongside C3s and C4s. Northern gas from Canada’s Mckenzie Delta is likely to be available by 2018.

Oil sands processing also offers considerable additional potential. Consultants Kline said this week that 15%-20% of waste from oil sands bitumen processing could be used to produce synthesis gas and chemicals.

Alberta’s crude oil equivalent production is expected to top 3bn bbls/day by 2010, the consultancy says. That will include synthetic crude oil, non-upgraded bitumen and extraction off-gases.

Kline has whittled down a list of some 170 products that could be made in the province to 31 strategic chemicals. C1, C2 and C3 products could be used to help develop the downstream processing sector, it says.

Bitumen is not the most attractive of materials and would have to be significantly upgraded to provide conventional downstream oil and petrochemical products.

But it could be handled in alternative ways to yields strategically important products such as the major polyolefins.

Integrated gas combined cycle processing combined with ammonia and urea units could reduce carbon dioxide emissions or the need for sequestration, Kline says.

Bitumen upgrading will exceed 3m bbl/day by 2025, it adds, yielding considerable quantities of "stranded upgrader bottoms" that could not necessarily find use as coke in domestic energy generation or export.

Alberta’s petrochemicals future, indeed, relies heavily on convincing producers that there is money to be made in using unconventional feedstocks and raw materials.

Alongside that, the provincial government and others have to recognise the potential for investment in upstream and downstream infrastructure, logistics and employee resources.

Kline envisages the development of an upstream and mid-stream chemicals ‘cluster’ in the Alberta heartland region and a downstream processing cluster near the city of Edmonton.

Fleshing out Alberta’s industrial landscape is key to its future chemicals development.

This is a perennial problem or rather issue for energy-rich regions and nations. Upgrading makes sense if the price and cost to market is right. NOVA’s Alberta advantage last year averaged 17 cents/lb. On current US Gulf Coast prices that is an advantage of around 28%.

Using more ethane makes sense, so long as the price is right. Making use of the new feeds and raw materials becoming available from oil sands processing could be advantageous but will take time and the application of a bit more lateral thinking.

Some work on an integrated chemicals site, or cluster, could start now, Kline’s Fred Du Plessis says, but the consultants stress that their study looks out over a 25-year timeframe. In its full version it becomes available at the end of May or in early June.

Producers will look at capital costs - estimated by Kline at 1.6 times the US Gulf Coast average - and at labour/productivity costs in Alberta which are relatively high before considering a project there..

Yet the search is on by all major producers to new feedstock sources - and with the right infrastructure and logistics, the best ways of getting products to market.

Alberta can be expected to build on its chemicals heritage given its vast energy potential. Kline’s 25-year timeframe looks about right.

By: Nigel Davis
+44 20 8652 3214

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