[Note: others have found that these gas fields aren’t nearly as “plentiful” as the industry players who want investments would have us believe.]
North American petrochemical companies are banking on the continent’s shale gas revolution to revitalize the […] industry, which is now planning to spend billions on new projects.
Leading the charge is Nova Chemicals, a Calgary-based company that has secured a crucial lifeline for its sprawling Ontario chemical complex through access to the prolific Marcellus natural gas fields in the United States.
Nova is taking advantage of plentiful supplies of low-cost natural gas from the Marcellus area to displace oil as a feedstock for its operations. The surging price of oil in recent years has pushed costs higher for the chemical industry, as it downsized operations and faced possible plant closings.
Nova – which traces its roots to Alberta’s gas gathering system – has signed deals with Sunoco Pipeline LP and two Marcellus shale gas producers to ship ethane – which is derived from natural gas liquids – to its ethylene plant in Corunna, near Sarnia, Ont., from southwest Pennsylvania. By doing so, the company will replace its ethane feedstock derived from high-priced crude oil from Western Canada with a source produced from low-cost natural gas in the United States.
Ethane is a component of crude oil as well as the hydrocarbon liquids that are often produced with natural gas. End products made from ethane include shrink wrap and other food packaging, grocery bags, toys and other common items.
“The key […] to get ourselves in growth mode again was to be absolutely out in front from a feedstock acquisition standpoint,” Nova Chemical chief executive officer Randy Woelfel said in an interview from the company’s executive offices in Pittsburgh.
In a deal announced earlier this month, Nova Chemical reached long-term supply contracts with Range Resources Corp. and Caiman Energy LLC, two significant Marcellus producers. The contracts backstop a move by Sunoco to transform existing pipelines to allow delivery of ethane and other natural gas liquids to the Sarnia area. Nova will spend $250-million to transform its processing equipment to handle a steady diet of natural gas-based feedstock.
Mr. Woelfel said the company is also upending traditional supply routes in Alberta to bring natural gas liquids derived from the booming Bakken play in North Dakota to its petrochemical facility in Joffre, Alta.
All told, Nova is hoping to invest $1.5-billion in the next decade to expand its polyethylene production in both Ontario and Alberta.
FROM ETHANE TO SHRINK WRAP
Nova Chemicals Corp.’s plant in Corunna, Ont., uses ethane from natural gas or crude oil to make ethylene.
Ethylene is made by “cracking” the ethane molecule under extreme pressures and temperatures, and then separating the ethane and co-products through cooling and compression. Ethylene is the main building block for polyethylene.
Linear low-density polyethylene: Flexible food packaging, shrink wrap.
Low-density polyethylene: Grocery bags, cable insulation.
High-density polyethylene: Industrial drums, children’s toys, pressure pipe.