Canada's Pembina increases share of cost on PDH/PP project, timeline extended

Canada´s Pembina Pipeline Corp. increased by C$200 million its share of the cost to build a propane dehydrogenator (PDH) and polypropylene (PP) plant complex and extended the time period estimated for the project’s completion.

Advances in InterPipeline's PHD/PP project as of third quarter of 2019. InterPipeline, like Pembina, is a Canadian pipeline company venturing into plastic resin production.

The revised cost and timeline came as the company negotiated its engineering, procurement and construction for the PDH part of the project, Pembina said on Jan. 7 as it announced a contract with Fluor.

“With this contract, CKPC has fixed approximately 60% of the cost of the PDH/PP Facility thus far,” the Calgary-based Pembina said.

CKPC stands for Canada Kuwait Petrochemical Corp., an equal joint venture of Pembina with Kuwait’s Petrochemical Industries Company building the propane dehydrogenater and polypropylene (PP) complex near Edmonton, Alberta.

Pembina revised its share of the capital cost of the PDH/PP facility to C$2.7 billion “following execution of the lump-sum EPC contract and with certainty for 60% of the project cost," it said.

“CKPC now expects the PDH/PP facility to be placed into commercial service in the second half of 2023,” it added.

Pembina initially estimated its proportional share of the capital cost at C$2.5 billion and a mid-2023 startup.

The planned PDH/PP facility will have capacity of 550,000 tonnes of PP per year, including impact and random copolymers, the company said in February 2019 as it announced its final investment decision.

There isn’t a decision yet in the ongoing selection process for a similar construction contract for the polypropylene plant, the company said.

Pembina, new to plastics, uses caution

Pembina is primarily a pipeline company. It has not had any experience with plastic resins. It relies on its Kuwaiti partner, already a producer and also engaged in global market petrochemical commodities trading, for the marketing of coming output.

"Pembina has consistently chosen certainty and downside protection, particularly in new platforms or new businesses,” the company said.

Pembina is also in ongoing discussions with potential customers.

“Our relentless pursuit of a lump sum contract for the PDH facility reflects our disciplined and prudent approach to capital allocation," said Mick Dilger, Pembina's President and Chief Executive Officer.

This project offers a new demand source for domestically produced propane and supports ongoing development of Canada's resources, he added.

According to the U.S. Energy Information Administration, Canada ranked fourth in 2018 in petroleum and total liquids production, after the United States, Saudi Arabia, and Russia.

Pembina’s investment is higher than that of Kuwait in the venture as it will own all related pipeline infrastructure.

Pembina, besides transporting hydrocarbons, also owns gas gathering and processing facilities in addition to other oil and natural gas liquids infrastructure.

Fluor readies to build its third facility of its kind

“Engineering on the project has begun, and construction is anticipated to begin in late 2020," Fluor said in a Jan. 9 press release confirming the contract.

Mechanical completion of the new PDH unit is planned for the second half of 2023, Fluor added. Kiewit Construction and Fluor are partners in the project.

CKPC’s new PDH unit will be “the third world-scale facility of its kind for Fluor in recent years,” said Mark Fields, group president of Fluor’s Energy & Chemicals business.

“Our partnership is committed to building a safe and reliable facility that not only fosters a positive economic impact but provides a long-term, sustainable solution for polypropylene production in Canada,” he added 

InterPipeline's PDH/PP is about 50% complete

Canada’s Pembina and its Kuwaiti partner are trailing efforts by InterPipeline, another Canadian pipeline company.

InterPipeline is going on its own with a similar PDH/PP project, the first to be developed in Canada and already halfway completed.

InterPipeline said in its latest project update in November 2019 that at the time there were over 7,000 workers on site.

As of the end of September, the total invested in the project was C$2.1 billion, said Craig McInnis, director of InterPipeline’s polypropylene project.

There is ongoing work with “contractors like Browns and Force, and Bird, we now have Fluor contractors on site.” McInnis said in a 2019 construction update video.

“They have basically landed all of their modules and equipment and they are really getting into the pipe welding and electrical installation part of their programs,” he said.

InterPipeline construction of the PDH/PP unit had been scheduled to take four years since it started in 2018. Completion is scheduled for late 2021. The complex will cost approximately C$3.5 billion.

Both complexes will be the first Canadian petrochemical plants to use propane as feedstock.

Canada produces around 11 million cubic metres of propane a year, and exports about half of it, according to the Canadian Propane Association. About 92% comes from natural gas extraction.

There are other petrochemical investments in Canada.


By Renzo Pipoli