Canada’s Pembina eyes second PDH/PP project in Alberta

Author: Stefan Baumgarten


TORONTO (ICIS)--The proposed combination of Canadian midstream energy firms Pembina Pipeline and Inter Pipeline (IPL) could lead to a second propane dehydrogenation/polypropylene (PDH/PP) production complex in Alberta province, officials said.

IPL has a PDH/PP project, known as the “Heartland Petrochemical Complex” (HPC), due to start up next year.

Plans for a  similar project by Pembina and Kuwait Petrochemical Industries (KPI), which have been suspended indefinitely, may now be revived if the Pembina-IPL combination goes through.

In an update on Monday, Pembina said its combination with IPL would
- eliminate the long-term propane supply risk for HPC,
- while "further improving the possibility of a second such facility".

Globally, petrochemical infrastructure tends to cluster with multiple facilities taking advantage of shared infrastructure and feedstock, Pembina said.

With this in mind, Pembina has undertaken a preliminary evaluation of the synergies that may be available to the combined entity through the development of a second facility.

The synergies could come to Canadian dollar (C$) 200m ($164m) of capital cost savings and about C$100m of annual operating, general and administrative expense savings - compared with building a single stand-alone facility, Pembina said.

In addition, Pembina and Kuwait Petrochemical Industries have “safeguarded a C$400m investment” in their previous project, including finishing several long-lead equipment orders that remain in storage, Pembina said.

“Pembina will continue to carefully consider possible next steps to progress further petrochemical infrastructure opportunities,” it added.

Pembina noted a number of other project opportunities that could come with its combination with IPL, including:

Cochrane Straddle Plant – Connecting IPL's Cochrane straddle plant to Pembina's Brazeau natural gas liquids (NGL) pipeline system would enable propane-plus liquids streams to be transported and processed with Pembina infrastructure, and ultimately be available to connect to Inter Pipeline's HPC.

Butane Splitter – The combined Pembina-IPL would provide “a critical scale supply” of butane to support the development of a butane splitter in Fort Saskatchewan. Front end engineering and design (FEED) of the butane splitter project is nearing completion.

Alkylation Facility – An alkylation facility downstream of the butane splitter in Fort Saskatchewan, capable of producing high-octane gasoline blend stock using alky feed from IPL's Redwater facility.  The project is at the pre-FEED stage with a preliminary capital investment estimate of C$400m.

Pembina and IPL agreed on 1 June that Pembina would acquire IPL, creating an energy infrastructure and petrochemicals firm with a pro forma enterprise value of C$53bn.

The agreement came as IPL is facing a hostile takeover bid by Brookfield Infrastructure Partners.

Key operational metrics for the combined Pembina-IPL entity:
(boe = barrels of oil equivalent; Bcf = billion cubic feet)

Pembina Inter Pipeline Pro Forma
Pipeline Capacity 3.1m boe/day 3.1m boe/day 6.2m boe/day
Processing Capacity 6.1 Bcf/day 2.7 Bcf/day 8.8 Bcf/day
Fractionation Capacity 350,000 bbl/day 40,000 bbl/day 390,000 bbl/day
Storage Capacity (excluding Europe) 32m bbl 6m bbl 38m bbl
PP capacity (startup in 2022) - - 525,000 tonnes/year

($1 = C$1.22)

Thumbnail photo: Inter Pipeline’s PDH/PP complex, under construction in Canada’s Alberta province. Source: Inter Pipeline