CALGARY, Alberta—Calgary-based Inter Pipeline Ltd. said on Dec. 18 it will build a $2.7 billion petrochemical plant in central Alberta, taking advantage of the provincial government’s subsidies for such facilities.
Inter Pipeline revealed plans for a petrochemicals plant late last year, and CEO Christian Bayle said he expects the facility to provide attractive profit margins given strong polypropylene prices in North America.
Alberta’s government is seeking to diversify the economy away from oil extraction, and Inter Pipeline’s decision to go ahead with the project is a welcome boost to the country’s largest oil-producing province, which has been struggling with more than three years of low crude prices and a lack of progress in getting new oil export pipelines built.
Foreign oil companies have sold off around $23 billion in Canadian assets this year alone.
The project is the single largest capital investment in Inter Pipeline’s history and will be funded by a combination of debt and equity financing.
The integrated propane dehydrogenation and polypropylene plant, known as the Heartland Petrochemical Complex, will be built in Strathcona County and is the first of its kind in Canada.
“Driven by attractive feedstock and utility costs, the Heartland Complex is expected to be one of the lowest cost polypropylene producers in North America,” Bayle said.
The facility will convert 22,000 barrels per day of propane, which is plentiful in Alberta because of abundant natural gas production, into 525,000 tonnes per year of polypropylene, a type of plastic.
The project will receive $155 million of royalty credits from the government’s Petrochemical Diversification Program, launched last year to encourage companies to invest in new facilities. It is one of two that received such credits.
The other, by Pembina Pipeline Corp. and Kuwait Petroleum Corp., has yet to receive a final investment decision.
“We’re excited to see this new investment that will create thousands of good-paying, value-added jobs and help diversify Alberta’s economy,” said Margaret McCuaig-Boyd, Alberta’s minister of energy.
Inter Pipeline will start construction in early 2018 and the plant is expected to be finished in late 2021.
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