Williams Energy Canada is betting a part of Alberta’s future will be in plastics, announcing plans to build a new facility to produce feedstock for plastics manufacturing using low-cost propane derived from the oil sands upgrading process.
Like other commodities, propane prices have been driven down by the ramp-up in U.S. shale oil and gas production. The $900-million Williams plant set for completion in 2016 will take advantage of the low propane prices to produce higher-value propylene, a petrochemical feedstock for plastics.
“Instead of producing more stuff and shipping it out, what we’re now doing is getting more value out of the stuff we are producing,” Williams Canada president David Chappell said of the plant to be located in Alberta’s oil processing heartland just northeast of Edmonton.
As political leaders debate the value of exporting raw bitumen – as opposed to a more-finished product – to the U.S. and global markets, Mr. Chappell said the yet-to-be-built facility is a win for Alberta and Canada. Its primary supply of propane is a byproduct from the process of upgrading heavy bitumen into synthetic crude oil. The plant will then turn the propane into higher-value propylene, creating a new petrochemical supply stream that Mr. Chappell believes will eventually lure a plastics manufacturer to the province.
“It makes sense because there’s a shortage of propylene, and there’s a lot of propane in Alberta that isn’t getting high value,” Mr. Chappell said.
Williams Canada – a fully owned subsidiary of Tulsa, Okla.-based Williams Cos. Inc. – already has Alberta processing operations and a pipeline, and produces some polymer-grade propylene derived from oil sands upgraders in Fort McMurray. But the new facility, still subject to permitting approvals, will be the only Canadian plant to use a propane dehydrogenation process and to be dedicated to producing propylene.
Once the Alberta facility is built, the propylene will be shipped by rail to petrochemical producers on the U.S. Gulf Coast. There the propylene will likely be turned into polypropylene – a durable plastic used in everything from textiles to food containers – or propylene-glycol, an antifreeze.
The company predicts about 70 workers will be able to annually produce approximately 500 kilotonnes of propylene – which currently sells at more than four times the price of propane – with an option to double capacity if a plant expansion is warranted.
Mr. Chappell said the capital costs of bringing a processing plant to Alberta might be slightly higher than in other locations, but that’s offset by low propane prices. He believes the addition of the new Williams plant in Alberta will eventually spur the creation of local facilities to make plastic products.
“We are talking to global petrochemical companies about siting a polypropylene plant in the province,” he said.
Alberta Energy Minister Ken Hughes, who said he’s also aware of global plastics players interested in Alberta, described the Williams propylene plant as a “cornerstone opportunity” for diversifying the province’s heavily oil and gas-reliant economy.
“As we work to get our products to market, one of the important ways to do that is to add value right here in the province, whenever we can,” Mr. Hughes said. “What we really want is a portfolio of ways to sell our products. So, some can be sold as raw product. Some can be sold as upgraded. Some can be sold as upgraded and refined.”
The minister confirmed that no government incentives were employed to spur development of the dehydrogenation facility. “This is the best of all possible worlds, where it is such a compelling case that there was no need for the government to play a role.”