Sturgeon County is set to receive an estimated $4 billion in capital investment and hundred of millions in municipal tax revenue thanks to a government-led diversification program.
The province announced the approval of two projects under its new Petrochemicals Diversification program Monday. Both are planned for the Alberta Industrial Heartland.
The first, a partnership between Alberta-based Pembina Pipeline Corporation and Kuwait’s Petrochemical Industries Company, will see the construction of two facilities on a recently purchased piece of land in Sturgeon County.
The complex will include both a propane dehydrogenation (PDH) facility and a polypropylene upgrader, which will transform 22,000 barrels of propane per day into propylene then polypropylene – the tiny plastic pellets used in the manufacturing of automobile plastics, medical supplies, home appliances and other products.
“I’m happy to see Pembina was selected as one of the projects that will benefit from this program,” said Sturgeon County mayor Tom Flynn. “It’s very exciting for Sturgeon County and for the Alberta Industrial Heartland.”
The project is worth an estimated $3.8 to $4.2 billion and is expected to produce 550,000 tonnes of polypropylene per year, which can be shipped anywhere in the world.
The complex is expected to be fully operational in 2021 and create 150 permanent full-time jobs, as well as 2,000 to 2,500 on-site construction jobs.
It will also result in annual tax revenues in the range of $12 million for Sturgeon County, said Tyler Westover, manager of economic development for Sturgeon County.
A final investment decision for the project will be made in 2018.
Announced in February 2016, the province’s Petrochemical Diversification Program encourages companies to invest in methane and propane upgrading, by offering royalty credits that can be used, sold or traded.
The Pembina/PIC project was approved for $300 million in royalty credits, which it will receive once the facilities become fully operational.
The proposed propane plants are the first of their kind in Canada.
Currently, Alberta exports 85 per cent of its propane feedstock to the U.S. The rest is used as fuel or for barbecues. The value-added product, which is imported into central Canada and other parts of the country, is worth seven times more than propane.
“It’s a big gain to leave those dollars in our province and our country,” said Ed Gibbons, chair of Alberta’s Industrial Heartland Association.
Though Alberta has an abundance of low-cost propane feedstock available, the province must compete with U.S. jurisdictions that offer incentives and inherently have much lower construction costs, due to warmer climates.
“This PDP money significantly helps the economics of building these plants,” said David Chappell, senior vice-president of petrochemical development for Inter Pipeline.
The incentive program received an unanticipated level of interest – 16 applications, representing $20 billion in potential investment in Alberta’s energy sector.
On Monday, Minister Deron Bilous said there was no plan to expand the program, but that the newly appointed Energy Diversification Advisory Committee would be looking at ways to secure these potential investments.
The second project will be located in Strathcona County. Inter Pipeline, which recently purchased Williams Energy, plans to construct a PDH project worth $1.85 billion. Construction is expected to start in 2017 and the facility could be operational by 2021. A final investment decision on this project is expected mid-2017.
Williams Energy, which sold off its Canadian assets this summer, had announced in 2013 that it planned to build both a PDH and a polypropylene upgrading facility.
While the upgrader was not included in Inter Pipeline’s application under the Petrochemical Diversification Program, Chappell said it will be looked into.
Together the propane plants represent a combined capital cost of $6 billion, will generate more than 4,000 construction jobs and 1,400 operational jobs, as well as a number of indirect jobs.
