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

Author: Stefan Baumgarten

2021/06/15

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.

OTHER PROJECT OPPORTUNITIES
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