Canada: A Petrochemical Spending Rush Is On In 2018

When it comes to investing in new chemical capacity, Canada has long dreamed big and delivered modestly. But that changed last year when Canadian firms green-lighted two large projects.

Canadian natural gas pipeline and processing firm Inter Pipeline approved the investment of $2.7 billion to build propane dehydrogenation (PDH) and polypropylene plants near Redwater, Alberta, by 2021.

Canadian chemicals

The industry should have another strong year in 2018, though profitability may slip.  
a  Projected.  
Note:  Profit margin is operating profits as a percentage of sales.

Source: Chemistry Industry Association of Canada

Some 22,000 barrels per day of propane, half from Inter Pipeline’s own processing plant, will enter the facility; 525,000 metric tons per year of polypropylene will leave out the back.

The rationale for the facility is compelling, Inter Pipeline says. Because of a large surplus with no easy outlet to market, propane sells at a substantial discount in Alberta compared with the U.S. Gulf Coast. The company says the facility will be one of North America’s most competitive.

A joint venture between Pembina Pipeline and Petrochemical Industries Co. of Kuwait is set to reach a decision later this year on a similar PDH and polypropylene complex in Alberta.

Meanwhile, Canada’s largest chemical maker, Nova Chemicals, also approved a long-considered project last month. The company will build a 450,000-metric-ton-per-year polyethylene plant in Sarnia, Ontario, by 2021 and expand its cracker there by 50%.

All the projects are getting support from the government. Alberta is pitching in nearly $400 million in royalty credits for the PDH complexes. Ontario is contributing about $75 million toward Nova’s projects.

To Bob Masterson, president of the Chemistry Industry Association of Canada (CIAC), such incentives are a must if Canada is to attract investment. U.S. jurisdictions aren’t shy about offering packages to prospective investors, he observes.

“It has taken a lot of work to get everybody rowing their oars in the same direction, but we seem to be getting some results,” Masterson says, noting that projects worth billions more are under consideration.

The investments are coming at a time of growth for the Canadian chemical industry. In 2017, it saw sales increase by 7% to hit $20.8 billion, according to CIAC. Chemical makers surveyed by the group expect another 7% sales increase this year.