By R.Bruce Striegler
In early March, Calgary-based Pembina Pipeline Corporation announced it had signed a letter of intent with a wholly-owned subsidiary of the City of Prince Rupert (Prince Rupert Legacy Inc.) to build a new liquid petroleum gas (LPG) terminal. “We are looking forward to a new beginning for our community as we work towards putting Watson Island back on the tax roll,” Prince Rupert Mayor Lee Brain said in a press release. The deal is the first step for the city to get the location generating tax revenue once again, after the former Skeena Cellulose Pulp Mill shut down in 2001, once the city’s biggest employer with nearly 1,000 workers.
The move by Pembina scraps previously announced plans to build the terminal in Portland, Ore. As port officials in Prince Rupert continue to await word on major investments in liquefied natural gas (LNG) export terminals, liquid propane exports are taking centre stage. In January 2016, Alberta-based AltaGas Ltd. announced subleases and related agreements were signed with Ridley Terminals Inc. to develop, build, own and operate the even larger Ridley Island Propane Export Terminal (RIPET). And on May 6, Royal Vopak (a Netherlands-based company) and AltaGas announced that they had entered into a joint venture to invest together in the development of RIPET, which is to be designed to ship 1.2 million tonnes of propane per annum, with approximately 96,000 cubic meters of storage capacity. The facility is expected to be commissioned in Q1 2019. Vopak will take a 30 percent interest in RIPET. Propane from British Columbia and Alberta will be transported to the facility using 50-60 rail cars a day through the existing CN rail network, and transported to global markets via Very Large Gas Carriers.
According to San Francisco’s Grand View Research, the global liquefied propane market is set to grow to US$147 billion by 2024.
Under the terms of the Letter Of Intent, Pembina has commenced site assessment and engagement with significant stakeholders including aboriginal communities. Located approximately 15 kilometres south of Prince Rupert, the Watson Island site has attributes which make it an attractive location for the Company’s West Coast Terminal. The land is the site of a former pulp mill and is already zoned for industrial use. The location features a sheltered berth, existing dock adequate for activities associated with LPG export, as well as well-established rail connections between Redwater, Alberta and Prince Rupert. The city’s legendary location provides efficient shipping routes to Asian, North, Central, and South American markets.
In support of the Project, Pembina has already secured a long-term export permit. The capacity of the proposed terminal is estimated at 1.2 million tonnes per annum of LPG with an associated capital cost ranging between $125 million and $175 million. Pembina has said it expects a project timeline of about two years from its final investment decision. The proposed terminal is subject to completion of design and engineering requirements, the receipt of necessary environmental and regulatory permits, and the approval of Pembina’s Board of Directors.
The Company has been working towards the development of an LPG export terminal served by a national railway on the west coast of Canada for the past several years in anticipation of, and in response to, the increase in LPG production capability of the Western Canadian Sedimentary Basin. In an accompanying news release, Stuart Taylor, Senior Vice President, NGL & Natural Gas Facilities says, “Pembina is excited to advance its West Coast Propane export strategy. In light of our plans to develop a world-scale polypropylene production facility, the smaller export facility we are contemplating for Watson Island – utilizing smaller ships and ensuring very competitive per-unit export facility costs – makes good sense for Pembina. This Project is evidence of our efforts to find new markets for western Canadian hydrocarbons which should benefit our producer customers, local communities, partners and shareholders.” Pembina is also investing $235 million expanding its pipeline system in the natural gas liquids-rich Montney formation of northeastern B.C. The 145 kilometres of new pipeline system is being built as a “conduit” for natural gas liquids, the company states.
Prince Rupert is where Petronas (Malaysia’s fully integrated oil and gas multinational) has been planning to build an $11 billion liquefied natural gas (LNG) plant. The company originally intended to make a final investment decision in 2015 but delayed that decision, and is now reviewing the project. According to Bloomberg News reports in January 2017, that review includes considering an alternative location to ecologically sensitive Flora Bank for the terminal, due to concerns about the impact on fish habitat. According to the report, Petronas is considering moving the terminal to a site on nearby Ridley Island, which is managed by the Prince Rupert Port Authority, and could save the company nearly a billion dollars.