NOVA Chemicals Corporation has signed a letter of intent with Aux Sable Canada Ltd to develop an ethane extraction plant in Fort Saskatchewan, Alberta that would process natural gas from the Alliance Pipeline.
Aux Sable and NOVA will work together to develop the project, which is to be owned and operated by Aux Sable and expected to begin operating in mid-2010. Estimates put the cost of the plant at C$100 million.
The extraction plant will have the capacity to process as much as 1.2 billion cfd of natural gas and will produce approximately 40,000 b/d of ethane. The extraction plant will be located on land owned by Aux Sable in Fort Saskatchewan, adjacent to the site of Aux Sable's Heartland Off gas Plant. Ethane will be delivered by pipeline to NOVA's Joffre, Alberta petrochemical complex for use as an ethylene feedstock.
"Maintaining and extending the Alberta Advantage for the production of ethylene is fundamental to the long-term viability of the petrochemical industry in the province," said Jeffrey M. Lipton, president and CEO of NOVA Chemicals. "By increasing the recovery of ethane currently being exported from the province, this project will help position NOVA Chemicals and the rest of the Alberta petrochemical industry for future growth."
Bill McAdam, president and CEO of Aux Sable, said the project is an important step in the company's strategy to be a leader in fee-for-service processing in the Fort Saskatchewan area. "We are excited about the opportunity to grow our Fort Saskatchewan facilities and to play an increasing role in the Government of Alberta's vision of value-added resource processing in the province," he said.
The increased ethane supply created by the plant could help the Alberta Advantage over Gulf Coast producers for the longer term. However, in a Tuesday research report, Merrill Lynch analyst Don Carson pointed out that increased U.S. Gulf Coast ethane supply could ease he Alberta Advantage as new LNG import terminals open with ethane extraction capabilities.
Meanwhile, Tim Sauft, Aux Sable's executive vice president, told The Canadian Press that the ethane royalty changes proposed by the Alberta government did play a role in the development of the project. "We do expect to be applying under the program when it is announced," he said.
Many producers currently find ethane unprofitable to extract within the province with many shipping the liquid on natural gas streams to the United States via the Alliance Pipeline. However, last fall the provincial government announced it would be revising outdated ethane royalty regimes to encourage incremental ethane production in Alberta.
Final details are expected later this year on the changes.
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