Capital cost increases as EPC contract awarded for new Alberta petchem plant

Image: Fluor

Canada Kuwait Petrochemical Corporation has awarded the engineering, procurement and construction (EPC) contract for a large piece of its new Alberta facility to Heartland Canada Partners, a joint venture of Fluor Canada and Kiewit Construction.

CKPC itself is a joint venture of Pembina Pipeline Corporation and Petrochemical Industries Company K.S.C. of Kuwait.

Pembina made the EPC announcement on Wednesday.

The contract is for the propane dehydrogenation (PDH) portion of the integrated PDH and polypropylene (PP) facility CKPC is building near Fort Saskatchewan.

The project has up to $300 million of royalty credits from the Alberta government committed through the Petrochemicals Diversification Program.

The EPC contract is lump-sum, meaning that approximately 60 percent of the capital cost of the full PDH/PP facility is now fixed, Pembina said. The estimated capital cost, however, has increased to $5.4 billion from $4.5 billion previously. The project schedule has also been pushed out modestly, from mid-2023 to the second half of 2023.

"When faced with the proposition of trading returns for risk, Pembina has consistently chosen certainty and downside protection, particularly in new platforms or new businesses. Our relentless pursuit of a lump sum contract for the PDH facility reflects our disciplined and prudent approach to capital allocation," Pembina CEO Mick Dilger said in a statement.

"This project is highly strategic for Pembina and our producer customers in the Western Canadian Sedimentary Basin. It offers a new demand source for domestically produced propane and supports ongoing development of Canada's world-class hydrocarbon resources."

The contractor selection process for the PP facility is ongoing, the company said.

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