All signs point to second new Alberta petchem plant proceeding: Peters & Co.

A final investment decision has yet to come on the second of two petrochemical projects with funding committed by the Alberta government, but analysts are expecting positive news to come early next year.

Pembina Pipeline received a commitment of up to $300 million in royalty credits from the Government of Alberta in late 2016 to build a propane dehydrogenation and polypropylene (PDH/PP) facility. The project would transform low-cost local propane into plastic pellets for products including home electronics and medical devices.

At the same time as the Pembina announcement, Inter Pipeline Limited was committed up to $200 million in royalty credits for its own PDH/PP facility, the $3.5 billion Heartland Petrochemical Complex. Further along in the regulatory and project development process, Inter Pipeline commenced construction in December 2017.

Pembina, which is partnered in its PDH/PP facility with Kuwait Petroleum Corporation, updated investors on the project status this week. Completion of front end engineering and design is expected in late 2018, followed by a final investment decision on the $4 billion project in early 2019.

“All signs point to this project going ahead,” analysts with Peters & Co. said in a research note on Thursday. “We continue to assume a 50 percent probability in our forecasts that this project will be advanced, which is probably too conservative.”

Executives stressed that there is room for both PDH/PP facilities in the province, added analysts with GMP FirstEnergy.

“Management remains confident that the current surplus of propane in western Canada can support both PDH/PP facilities announced recently, [and] the two LPG export terminals under development in B.C. and still have excessive propane to export via rail. The company views Alberta having major advantage in producing polypropylene given the abundance of low-cost feedstock, attractive labour market, existing connectivity and government support.”

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