Calgary-based Inter Pipeline Ltd. is constructing Canada’s first integrated propane dehydrogenation/polypropylene (PDH/PP) plant. Located in the Edmonton region, the $3.5-billion Heartland Petrochemical Complex will process locally sourced propane into plastic pellets for use in a variety of everyday end uses.
We connected with David Chappell, Inter Pipeline’s senior vice-president, petrochemical development, to talk about the project for the Summer 2019 Alberta Oil & Gas Quarterly. Download your free copy here.
Is Alberta a competitive place to build petrochemical projects compared to other locations like the U.S. Gulf Coast?
While capital costs to build large-scale facilities in Alberta are typically greater than the USGC, the oversupplied propane market in Western Canada drives a long-term, low-cost feedstock advantage. This market is projected to remain oversupplied for the long term.
In addition, Alberta has an abundance of highly skilled and experienced labour and low-cost utilities: natural gas and electricity. Alberta’s location is also rail-cost competitive to major markets, all of which help drive down the project’s expected operating costs to the point that we have a cash-cost advantage to other PP plants in North America.
The other thing that is meaningful to Albertans, and a reason the Heartland Petrochemical Complex is being so well received, is that this plant will add significant value to local resources. It can be built and approved right here in Alberta – without being hindered from other jurisdictions.
Why did Inter Pipeline select to build a PDH/PP plant versus other petrochemical designs such as an ethane cracker?
Inter Pipeline is the only producer of polymer grade propylene in Canada, and as a large propane producer we identified that we had a very knowledgeable team that could capitalize on this opportunity and leverage the abundant supply of low cost feedstock.
We also factored in the shortage of both propylene and polypropylene in North America and the competitive delivery costs to markets that we felt this was an extremely achievable business for us to enter into.
How far along would you say Inter Pipeline is on the project’s commercial contracts?
We have executed multiple contracts and continue to receive interest from a wide range of counter-parties.
When we began this project, we stated the objective of securing 70 to 85 percent of total petrochemical processing capacity under take-or-pay contracts with an expectation to carry out negotiations through the entire four-year construction window, and that continues to be the case.
This contracting strategy is expected to provide Inter Pipeline with a large and stable cash flow stream that is not exposed to commodity prices or production fluctuations.
What is the current project status of the Heartland Complex?
From a construction perspective, the project remains on schedule. As of June 30, 2019, we have incurred approximately
$1.6 billion of the $3.5 billion capital spend and have achieved some significant construction milestones including the
installation of five critical towers on both the PDH and PP plant, with more and more going vertical all the time.
Construction is now running 24 hours a day as we’ve added a night shift, and there are more than 1,200 people working on site daily.
Communicating this construction phase is an area where we have been proactive. Videos depicting the project’s progress are available quarterly on our website’s project page at www.interpipeline.com and on our Twitter account @inter_pipeline.
We’re also actively recruiting for many of the approximately 200 full-time jobs the Heartland Complex will create and may have as many as half of those positions filled by the end of 2019.
How does Inter Pipeline plan to invest the recent funding for the Heartland Complex from the Government of Canada?
In March of this year, the federal government announced a $49 million commitment to Inter Pipeline in support of the Heartland Petrochemical Complex under its Strategic Innovation Fund.
This commitment was made to support the facility, which is the first of its kind in North America and will produce
polypropylene, which is currently not produced in Canada.
It acknowledges the new markets we are opening for Canada and that we will be providing quality new jobs for Canadians.
This grant supports a range of initiatives that will be undertaken by Inter Pipeline ranging from opportunities for students and job creation to investments in related industrial research and development. We’ll have several announcements in 2019 related to this funding, which we are looking forward to sharing at a later date.
These types of initiatives go a long way towards creating a competitive environment for developing major projects in Canada.