Pembina CEO Says ‘Exciting Developments’ Cause For ‘Growing Enthusiasm’ For Western Canada’s Oil and Gas Sector
Pembina Pipeline Corporation’s top executive says there have been some “exciting developments” recently which support the company’s “growing enthusiasm” for the continued strengthening of the business environment for Western Canada’s oil and gas sector.
“First, we are encouraged to see a significant announcement from Dow Chemical highlighting plans to build a new world-scale polypropylene-polyethylene cracker in Fort Saskatchewan, Alberta,” Mick Dilger, president and CEO, told the company’s third quarter conference call Friday.
“We estimate over 100,000 barrels per day of new ethane feedstock supply could be required for this project, which should have positive implications for third-party service providers as new infrastructure will be required for ethane extraction and transportation.”
Given the potential Dow opportunity, Dilger was asked when the company might need to expand the Alberta Ethane Gathering System (AEGS) or make other tweaks to its portfolio as the demand for incremental ethane supply increases.
“As you know, we have ethane extraction assets all over the province so we're just sorting through the portfolio. And frankly, the diversification that our customers are asking for, they're not asking for just one source, they want geographically diversified products for obvious reasons,” he said.
“So they're putting billions into the ground and they don't want to be beholden to supply source.”
Jaret Sprott, chief operating officer, facilities, said Pembina is currently evaluating all of the pipelines that feed current customers.
“So between AEGS and Vantage and the Peace system, etcetera, and evaluating the Redwater complex on where do we need to expand to provide our customers with that diversification. They want to ensure that the C2 molecules, their feedstock, are coming from a variety of sources. So we're working through that right now,” he said.
‘Positive tailwinds’ for Alliance
A second development that has the company excited, Dilger said, is that Pembina is “seeing positive tailwinds” on the Alliance Pipeline.
“A recent open season for short-term capacity was nearly three times oversubscribed, resulting in Alliance being essentially fully contracted through 2022 and the current outlook also supports contracting of capacity beyond 2022,” he said. “We look forward to providing further updates by the end of the year.”
From a longer-term contracting perspective, Dilger was asked how Pembina would possibly build out the Alliance asset as a conduit to the Gulf Coast, whether it be more of a greenfield initiative, M&A or more strategic partnerships downstream.
“A bunch of this gas is making its way to the Gulf Coast and with $20-plus an mcf product, you can imagine why and as [Stu Taylor, senior vice-president, marketing and new ventures and corporate development officer] told our board yesterday that there's a better part of 10 bcf a day of new export capacity being developed on the Gulf Coast. And until more things happen, like our Cedar LNG projects — albeit that goes to Asia — we think there's going to be a continued desire for shippers on Alliance to get to the coast,” he said.
“And certainly that's caught our attention. So that is under review. And I think … there's also a very robust activity for longer-term contracts interest underway, and I'm quite certain some of that has to do with Gulf Coast exports.
“It took us a few years to digest Alliance. I think there is [a] possibility with Alliance to really put a lot of gas into that line and to look downstream, as we have, for where does the ethane go, where does the propane go, where does the methane go and keep our vertical integration going downstream. And I know Stu’s team is looking at that.”
Finally, Dilger said the third positive development in recent weeks and months was the completion of Enbridge Inc.’s Line 3 replacement project which “represents a major milestone” for the industry and meaningful advances to the western Canadian oil egress.
“In conjunction with the Trans Mountain pipeline expansion currently under construction, we expect the Western Canadian Sedimentary Basin will soon have up to 750,000 barrels per day of excess takeaway capacity, providing ample opportunity for supply growth meaningfully to fill the gap, with the potential for related benefits to accrue to Pembina also over the long term,” he said.
New ventures update
Dilger said Pembina's New Ventures continues to “advance business opportunities” in petrochemicals, terminals, including LNG, and low-carbon energy.
“New Ventures is focused on developing opportunities that integrate into Pembina's core businesses, while progressing projects that will extend Pembina's value-chain and benefit stakeholders,” the company said in its Q3 release.
As an example, Dilger noted that Pembina has formed a strategic partnership agreement with the Haisla First Nation to develop the proposed Cedar LNG project, a floating LNG facility strategically positioned to leverage Canada's abundant natural gas supply and British Columbia's growing LNG infrastructure to produce industry-leading low–carbon, low-cost Canadian LNG for overseas markets.
“The Cedar LNG project is expected to be the largest First Nation-owned infrastructure project in Canada and have one of the cleanest environmental profiles in the world.
In addition, Pembina and TC Energy Corporation intend to jointly develop the Alberta Carbon Grid, a world-scale carbon transportation and sequestration system, which will enable Alberta-based industries to effectively manage their greenhouse gas emissions, contribute positively to Alberta's lower-carbon economy and create sustainable long-term value for Pembina and TC Energy stakeholders.