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AltaGas’ propane export terminal could lift Canadian prices, compete with Gulf Coast

HOUSTON, January 18, 2017 (PCW) -- Calgary-based AltaGas kicked off the New Year by announcing it would build a 1.2 million mt/yr (38,200 b/d) propane export terminal on Canada’s West Coast.

The Ridley terminal is expected to go into service in 2019, joining the only other North American LPG export facility, PetroGas’ 30,000 b/d Ferndale site in Washington. The announcement opens up new avenues for stranded Canadian supplies that have brought previously Western Canadian propane prices down to negative territory during non-peak heating months.

US West Coast exports, although rising year-on-year (see graph below) only make up about 3-5% of total US propane exports. Propane exports from British Columbia, however, make up about 14% of total Canadian exports with the bulk being done via rail, since waterborne LPG exports do not currently exist.

The Ridley terminal is not a sure thing. Building energy infrastructure on Canada’s West Coast is notoriously difficult due to the Not-In-My-Backyard mindset among many stakeholders. This week, the British Columbia First Nations filed a lawsuit challenging the liquefied natural gas terminal that has been proposed close to the Ridley site. But should the Ridley facility get built, there are some interesting knock-on effects to ponder:

--With a 10-day sailing time to markets in Asia, would West Coast terminals be better positioned to nab spot cargoes from the Gulf Coast (sailing time 25 days)?

--How much would western Canadian propane production grow given the terminal and other demand projects? (Supplies came in at 172,000 b/d in 2015 and early 2016 estimates show nearly flat growth).

--How much price support could a high utilization of the terminal, especially for spot cargoes, provide? (Edmonton spot prices average about 15-17 cpg under Mont Belvieu, but in winter hold a 2-5 cpg discount).

In the post-2020 time period, the facility could face competition for supplies from two proposed Alberta propane dehydrogenation units from Inter Pipeline and Pembina/PIC with a total propane consumption capacity of 60,000 b/d. This could further tighten western Canadian supplies and provide more support to Edmonton prices going forward. -- Samantha Hartke

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