Calgary (Platts)--20Nov2012/532 pm EST/2232 GMT

Williams Energy will apply in early 2013 to Alberta's Energy Resources Conservation Board to build a natural gas liquids and olefins processing facilities in the province, even as it aims to add a new petrochemical value chain, the company's head of its Canadian operations said Tuesday.

Three facilities are planned to tap the offgas produced from oil sands upgraders in Alberta. These are an extraction plant at the Horizon oil sands upgrader operated by Canadian Natural Resources near Fort McMurray, a 70-km (45 mile) expansion of the Boreal NGL pipeline and a debottlenecking of Williams' fractionation plant at Redwater, Williams Energy Canada president David Chappell said in an interview.

"The facilities are estimated to cost C$500 million-600 million [$502 million-603 million] and we will start up the facilities in second-quarter 2015 at 11,000-12,000 b/d," Chappell said. "By 2017, output will be ramped up to 15,000 b/d of ethane, ethylene, propane and propylene."

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The investment comes in the wake of a late September agreement Williams signed with CNR to process offgas produced during upgrading bitumen.

The additional volumes of ethane and ethylene to be produced from the company's Redwater fractionation facility will be supplied to Calgary-based Nova Chemicals under a 17,000-b/d deal it signed in March, 2011. The propane will be sold in the North American market, while propylene will be shipped by rail to the US Gulf Coast, Chappell said.

"At present, petrochemical producers in Alberta face uncertainty over long-term supplies of feedstock ethane. Our deal with CNR will bring about a stability as there are no reserve risks associated with processing offgas from upgraders that remain in production for nearly 30 years," he said.

NEW VALUE CHAIN

Meanwhile, Williams is carrying out a front-end engineering and design study for a propane dehydrogenation facility it is considering to build in Alberta, which would make it the first of its kind in Canada, he said.

Estimated to cost C$600 million-800 million, it would be located close to Williams' fractionation plant at Redwater and is targeted for start-up in late 2015, he said.

"We have not taken a final investment decision as yet, but the PDH facility will allow us to increase our production of polymer-grade propylene from our Canadian operations and also add a new value chain in the province," Chappell said, adding the plant will require 19,000 b/d of feedstock propane of which 13,000 b/d will be sourced from its Redwater plant and the remaining 6,000 b/d would be bought from the open market.

The PDH facility would convert propane into propylene to be transported to the US Gulf Coast. Also recently, the company bought some pipelines from ExxonMobil and will transport PDH to petrochemical producers in Texas by building a propylene distribution facility.

"In Alberta, the PDH plant could sustain two new polypropylene plants and we are in talks with world-class players keen on building new facilities here," Chappell said, without elaborating. "Our role would be restricted to that of a feedstock supplier and we are unlikely to join as equity partners."

Separately, Williams remains on track to invest C$2.8 billion by 2017 in the midstream business in Alberta and is continuing talks with operators of oil sands upgraders to secure additional volumes of offgas, he said.

"For propane and propylene, the margins in Alberta are better compared with the US Gulf Coast and that would be a reason for us taking a decision to invest in a PDH facility," Chappell said.

--Ashok Dutta, newsdesk@platts.com

--Edited by Carla Bass, carla_bass@platts.com

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