Inter Pipeline is moving ahead with plans to build the first Canadian integrated propane dehydrogenation unit and polypropylene plant in Alberta, the company said Monday.
The company's board of directors authorized construction of the Heartland Petrochemical Complex, which will house a 525,000 mt/year PDH unit and a 525,000 mt/year PP plant in Strathcona County, Alberta near Inter Pipeline's Redwater Olefinic Fractionator.
Construction for the $3.5 billion project is expected to begin in early 2018 with completion scheduled for late 2021. "Driven by attractive feedstock and utility costs, the Heartland Complex is expected to be one of the lowest cost polypropylene producers in North America," Inter Pipeline's President and CEO Christian Bayle said.
HEARTLAND PETROCHEMICAL COMPLEX
The PDH facility will convert about 22,000 b/d of propane into 525,000 mt/year of polymer-grade propylene, which will then be sent to the PP plant to produce 525,000 mt/year of polypropylene.
Propane feedstock for the PDH plant will be sourced from Inter Pipeline's Redwater Olefinic Fractionator as well as several other third party fractionators in the region, the company said.
Engineering for the PDH plant was awarded to Fluor Corporation in 2013 and is approximately 85% complete. The company has also completed early civil work at the site in preparation for construction in early 2018.
On the PP plant, Linde Engineering has been working on the front-end engineering and design phase since 2017, with work about 70% complete. Construction for the PP plant is expected to begin in the second half of 2018.
Other construction activities associated with the project include product storage facilities and rail loading assets to facilitate the transport of polypropylene pellets to various North American markets.
The decision to move forward comes after Inter Pipeline acquired Williams Partners LP's Canadian NGLs businesses in August 2016, including substantial design plans and equipment for a 22,000 b/d PDH plant that would produce 525,000 mt/year of PGP. Williams had invested about $250 million in the project, with site preparation near a fractionator close to Edmonton.
COMMERCIAL TERMS, FINANCING Inter Pipeline has phased out the contracting process for the investment. Phase 1, which is already complete, resulted in the company acquiring some take-or-pay contracts with an average term of nine years. Phase 2 contracting will begin in early 2018 and is expected to secure between 70%-85% of total processing capacity under take-or-pay contacts over the next 4 years.
Inter Pipeline plans to use the remaining uncontracted plant capacity for its own commercial purposes.
Inter Pipeline will also receive $200 million of royalty credits from the Government of Alberta's Petrochemical Diversification Program. The credits were provided in support of the construction of the PDH plant and will be monetized over a three-year period once the complex is operational.
"Inter Pipeline anticipates that capital commitments over the next four years will be met through a combination of capacity available under an existing $1.5 billion committed credit facility, undistributed cash flow from operations, the periodic issuance of new term debt, hybrid debt securities and proceeds from existing dividend re-investment programs," the company said. "Inter Pipeline does not expect the need for material, underwritten equity offerings to finance its funding obligations."
