Pembina Pipeline Enters Ethane-Supply Agreement, Slow Walks LNG Project

Pembina Pipeline, which saw a 12% fourth-quarter boost in transported NGLs, has entered into a long-term agreement to provide Dow with 50,000 bbl/d of ethane.

“This ethane is going to be supplied from a mix of the existing portfolio, as well as new. And the new ethane will come from some of the various projects that we're currently evaluating,” said Scott Burrows, Pembina's president and CEO.

In November 2023, Dow announced plans to build a new ethylene cracker and derivatives facility in Fort Saskatchewan, Alberta. The facility will be a major boost to the oil and gas industry in the Western Canadian Sedimentary Basin.

“This will call for an ‘all-hands-on-deck’ approach to increasing Alberta’s access to ethane supplies from numerous sources,” RBN Energy analyst Martin King wrote.

Ethane is a by-product from refinery production or natural-gas processing, and is used primarily for ethylene production. The first phase of facility construction, which Dow calls the “Path2Zero Project,” will be completed in 2027, with a planned capacity of 1.285 million tonnes per year of ethylene and polyethylene capacity.

“Given Pembina’s existing leading ethane supply and transportation business and integrated value chain, there are multiple opportunities for the company to benefit from this new development through both, the existing asset base and new investment opportunities,” Burrows said.

Pembina executives discussed future projects for the company’s natural-gas production, particularly a long-awaited decision to move forward with a floating LNG export facility.

Executives said they would hold off until the middle of 2024 on an FID decision for its Cedar LNG project on the Canadian West Coast, near Kitimat, British Columbia. The project has already passed through several developmental steps, Burrows said. The proposed facility has all major regulatory approvals, and Samsung Heavy Industries and Black & Veatch have signed contracting agreements for engineering and construction.

The facility will be connected to the Coastal GasLink pipeline owned by TC Energy.

“While a lot has been accomplished, there remain a number of schedule-driven interconnected elements that require resolution prior to making the final investment decision,” Burrows said. Some of the decisions for executives include making binding agreements for LNG export and securing project financing.

The company reported a record financial year in 2023, with earnings of CA$1.78 billion (US$1.32 billion) and an adjusted EBITDA of CA$3.824 billion (US$2.83 billion).