OREANDA-NEWS. The Canadian petrochemical industry has the potential for future growth because of its globally competitive economics — namely lower feedstock prices — according to a study from the Canadian Energy Research Institute (CERI).

The primary sources of petrochemical feedstock in Canada are natural gas liquids (NGLs) from processing plants and off-gas plants, which are used as feedstocks for olefin or ethylene crackers in Alberta and Ontario. Ethane is most commonly used, with 75pc of current capacity used to convert ethane to ethylene.

NGL feedstocks puts Canadian peterochemical firms at an advantage to much of the world, which mostly uses more expensive oil-based feedstocks. Only the US and the Middle East rely primarily on NGLs and are cost-competitive with Canada.

Incentives that reduce feedstock prices in the Middle East, especially in Saudi Arabia, combine with the region's proximity to Asian markets to make it competitive with Canada. In the US, ample natural gas production combined with several petrochemical expansion projects on the US Gulf Coast contribute to the region's competitiveness.

After feedstock price, availability of feedstocks gave Canada a competitive advantage. CERI forecasts that 300,000-350,000 b/d of additional ethane is available for processing, which is enough to support two or three world-class ethylene crackers. If new crackers are built, additional infrastructure to support increased production will also be needed, as current utilization averages above 90pc.

Development of new projects is currently underway, with Nova Chemicals and Williams Energy Canada both announcing petrochemical projects in Canada.

Nova Chemicals is expanding its polyethylene facilities in Joffre, Alberta, which uses ethane as its primary feedstock. The expansion will increase the site's polyethylene capacity by 40pc through the addition of a third polyethylene reactor. The new reactor will have production capacity of 950-1,100mn lb of linear low density polyethylene, and is scheduled to start up in the fourth quarter of 2016.

Williams proposed building a propane dehydrogenation (PDH) plant in Alberta in 2012. If built, the plant will utilize propane produced in Williams' Redwater Olefins Fractionation facility and propane purchased locally as a feedstock to produce propylene. In July Williams said it was receiving quotes for equipment for the project.

The Canadian petrochemical industry will face other challenges to increasing production. The industry's current design is aimed at serving US and Canadian markets, neither of which shows much potential for increased petrochemical demand. To deliver products to demand centers overseas would require expanding infrastructure to connect producers with the market in eastern Canada and to transport production to the British Columbia coast in western Canada.

Some pipeline capacity expansions for moving feedstock to producers is planned, such as the expansion of Pembina Pipeline's Vantage Pipeline, which moves ethane from North Dakota's Bakken shale to petrochemical producers in Alberta. The pipeline will increase its capacity from 40,000 b/d to about 68,000 b/d, Pembina said. Most growing transportation needs will likely be met by rail, however, as new pipeline projects in Canada tend to draw significant public opposition.