Alberta petrochemical project cost estimate rises to about $4.9 billion

The cost of a petrochemical project near Edmonton designed to turn propane into plastic pellets to be shipped to manufacturers around the world has risen to about $4.9 billion, up about $400 million from original estimates.

Calgary-based Pembina Pipeline Corp. says the adjustment is a result of the awarding of a lump sum engineering, procurement and construction contract for one of two integrated petrochemical plants in the facility.

CEO Mick Dilger says the decision to award the contract to Fluor Canada Ltd. and Kiewit Construction Services ULC is prudent because it removes uncertainty and risk by locking in 60 per cent of the capital cost of the project expected to be in commercial service in the second half of 2023.

Pembina has a 50 per cent interest in the joint venture with Petrochemical Industries Company of Kuwait which will own the propane dehydrogenation and polypropylene upgrading plants.

Pembina is also paying for projects involving supporting facilities in which it will retain full ownership. The plants will be located next to Pembina’s Redwater fractionation complex, which extracts liquids such as propane, ethane and condensate from raw natural gas.

The company now says it expects its share of the costs will be $2.7 billion, up from $2.5 billion announced a year ago.

The facility is to consume about 23,000 barrels per day of propane to produce up to 550,000 tonnes of polypropylene per year.

Pembina was awarded $300 million in royalty credits in 2016 as an Alberta government incentive for the project, at the same time that Inter Pipeline Ltd. got $200 million in credits for its nearby $3.5-billion polypropylene project.