Canada´s Inter Pipeline, a midstream operator that will complete this year the construction of the country´s first PDH and polypropylene complex, is studying a project that could turn the facilities located near Edmonton, Alberta into net zero emissions through carbon storage.

Image by Ewan Nicholson - Courtesy of Inter Pipeline

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“The project is a logical next step following IPL’s commitment to sustainable plant design and production at the Heartland Petrochemical Complex,” Inter Pipeline said on March 14. This is the company´s first downstream venture.

The new 525,000-tonnes annual polypropylene capacity is set to start this year. It involves processing propane through a propane de-hydrogenator (PDH) into propylene, and then into polypropylene. Polypropylene resin can be shaped in many forms with multiple applications across packaging and manufacturing, including automotive and health industry.

Inter Pipeline, along with its partner in the carbon storage project, Rockpoint Gas Storage, have submitted “a joint application as part of Alberta’s Energy’s Request for Full Project Proposals to develop a new carbon sequestration hub in Alberta’s Industrial Heartland.”

Alberta wants to use “pore space” for carbon sequestration in the province, according to its website. Pore space refers to any air or water spaces underground between soil particles. Using these underground spaces in certain safe locations may immediately prevent emission releases into the air.

Carbon sequestration

“A carbon sequestration project of this scale will further position Alberta as a leader in the energy transition and advance its decarbonization targets” said Inter Pipeline´s Interim CEO Brian Baker.

According to Canadian law enacted in 2021, the country must achieve net zero emissions by 2050.

“Timely access to economic pore space is a critical enabler to the development of net zero industrial projects,” Baker added.

Rockpoint can manage long-term geological sequestration of carbon dioxide because it has over two decades of operational and regulatory experience, said Rockpoint´s CEO Toby McKenna.

The effort is similar to a carbon pollution underground storage initiative in the U.S. Gulf Coast.  Houston area refiners and chemical companies recently joined efforts to explore possible underground storage in the U.S. Gulf Coast for their emissions.

Start-up activities

The PDH and polypropylene plant complex was “substantially complete” and efforts were transitioning to commissioning and start-up activities, Inter Pipeline said in February.

“Based on the latest integrated schedule we continue to target a mid-2022 start-up, despite ongoing COVID-related challenges,” it said.

There will be “certain additional commissioning expenses and interest during construction” added but those charges that continue to be finalized aren´t anticipated to significantly impact final cost, it said.

The power plant to the complex started to produce energy in the fourth quarter of 2021 and it is currently supplying to the Alberta grid while it awaits the startup. 

2021 results helped

Inter Pipeline announced in February “robust financial and operating results” in part due to a positive commodity pricing environment that helped compensate what could have been much worse due to a hefty one-time fee it faced.

The 2021 results “have successfully positioned Inter Pipeline to continue optimizing the business and bring the Heartland Petrochemical Complex online this year as planned,” it said.

Inter Pipeline´s net income fell to C$64 million in 2021 from C$360 million in the previous year because it had to pay in that year a breakup fee to free itself from an accord to sell the company to rival Canadian pipeline operator Pembina.

Net income decreased compared to the prior year primarily due to higher transaction costs of C$501 million “including a C$350 million transaction break fee incurred in relation to the strategic alternatives review commenced by Inter Pipeline in early 2021.”

The breakup fee, however, allowed Brookfield Infrastructure to buy the company and replace management, the same management that back in 2019 had been in the search for a strategic partner.

In 2020 a larger Canadian midstream operator, Pembina, canceled a similar PDH and polypropylene project where Kuwait´s PIC was a partner, also near Edmonton in Alberta, citing Covid-related uncertainties.

Polypropylene margins

North American polypropylene margins reached record highs in 2021 amid supply chain problems related to weather and other events, as well as high shipping costs.  

Analysts had anticipated that the polypropylene profit margins would ease into 2022 as resin from North American projects coming online from Inter Pipeline in Canada and Exxon Mobil in Louisiana would add supply.

Exxon Mobil plans to start 450,000-tonnes annually of new polypropylene production capacity in Louisiana later this year.

Inter Pipeline´s complex would be North America´s first polypropylene production capacity startup since 2020. Braskem started up in Sep. 2020 a plant in La Porte, Texas with one billion pounds per year (about half a million tonnes) capacity.

Braskem officials noted in a meeting with Brazilian investors in 2019 that North America had not seen a new polypropylene capacity addition in well over a decade.

Inter Pipeline will get a cost advantage in a context of high international crude oil prices by obtaining the propylene directly from propane compared with polypropylene producers that rely on refinery grade propylene.

Refinery grade propylene is a by-product of ethylene production in naphtha cracking and has more direct exposure to crude oil price volatility. PDH plants that instead of naphtha use propane to obtain the same product were built in the last decade adopting relatively still new technology.

Inter Pipeline´s new plant will find a North American market where resin sales are “doing well,” according to a leading industry executive of the North American polypropylene market.

“Now in the U.S. what we saw earlier this year is our spreads have remained unchanged even better than we expected and sales are also doing well,” said Pedro van Langendonck Teixeira Freitas, CFO from Braskem, on March 17, 2022 during the company´s fourth quarter 2021 discussion call.

Brazil-based Braskem is North America´s biggest polypropylene producer with five plants in the Northeast and Texas.

By Renzo Pipoli

(US$0.79 = C$1)