Alberta announces recipients of Petrochemical Diversification Funds
The Government of Alberta has awarded $500 million in royalty credits to two petrochemical projects:
A joint venture between Pembina Pipeline and Petrochemical Industries Company (PIC) has been approved to receive up to $300 million in royalty credits to build an integrated propylene and polypropylene facility in Alberta’s Sturgeon County, adjacent to Pembina's Redwater fractionator. The facility would convert 22,000 bbl/day of propane into polypropylene. Construction is expected to start in 2019 and the facility could begin operating by 2021. The plant will cost about $4 billion to build. Both Pembina and PIC have yet to make a final investment decision on the project. PIC is a subsidiary of Kuwait Petroleum Corporation.
Inter Pipeline was approved to receive up to $200 million in royalty credits to build a $1.85 billion facility in Alberta’s Strathcona County. The 22,000 bbl/day propane dehydrogenation plant will produce propylene, a feedstock for the production of polypropylene. Inter Pipeline purchased the project from Williams Companies' Canadian subsidiary earlier this year. The company says it is also assessing the commercial viability of constructing a $1.3 billion polypropylene plant, which would use the propylene feedstock. Inter Pipeline expects to make a final investment decision on both facilities by mid-2017. If approved, construction is expected to start sometime next year with both plants expected to be operational by mid-2021.
The funds will come from the Alberta's Petrochemicals Diversification Program, which provides royalty credits of up to $500 million once the plant is operating. Although petrochemical plants do not pay royalties, the facilities could sell the credits to oil and gas producers.
The government says it received 16 applications for the funds from around the world but they have no plans to expand the program at this time.