Canada: Petrochemicals Heartland Canada Partners Bags EPC Contract for New PDH Plant
Canada Kuwait Petrochemical Corporation has selected Heartland Canada Partners as the EPC contractor for its propane dehydrogenation (PDH) facility in Canada. The company expects the plant to commence commercial operations in 2023.
Calgary/Canada – Pembina Pipeline Corporation along with Petrochemical Industries Company of Kuwait has announced that Canada Kuwait Petrochemical Corporation (CKPC) has executed a lump sum engineering, procurement and construction (EPC) contract related to the construction of a propane dehydrogenation (PDH) facility within its integrated PDH and polypropylene (PP) upgrading facility. With this contract, CKPC has fixed approximately 60 per cent of the cost of the PDH/PP facility thus far. In conjunction with execution of the lump sum contract, the company also announced an update to its share of the capital cost for the PDH/PP facility and project timing.
Following execution of the lump sum EPC contract and with cost certainty for approximately 60 per cent of the project cost, Pembina has revised its proportionate share of the capital cost of the PDH/PP facility, including the 100 per cent directly-owned supporting facilities, to 2.7 billion dollars. The increase over the prior estimate is associated with the PDH facility, which is now fixed under the lump sum EPC contract. The revised capital cost estimate will not affect Pembina's previously announced 2020 capital budget. CKPC now expects the PDH/PP facility to be placed into commercial service in the second half of 2023.
"When faced with the proposition of trading returns for risk, Pembina has consistently chosen certainty and downside protection, particularly in new platforms or new businesses. Our relentless pursuit of a lump sum contract for the PDH facility reflects our disciplined and prudent approach to capital allocation," said Mick Dilger, Pembina's President and Chief Executive Officer. Dilger added, "This project is highly strategic for Pembina and our producer customers in the Western Canadian Sedimentary Basin. It offers a new demand source for domestically produced propane and supports ongoing development of Canada's world-class hydrocarbon resources."
CKPC has selected Heartland Canada Partners, a 50/50 partnership between Fluor Canada and Kiewit Construction Services as the EPC contractor for the PDH facility. Both companies bring extensive EPC track records for safety, quality and delivery in the petrochemical space in Canada. The contractor selection process for the PP facility is ongoing.
Since initially announcing its intention to pursue the PDH/PP facility, Pembina has been steadfast in its approach to de-risking the project, including: obtaining a 50 per cent partner that is a world leader in petrochemicals; lump sum EPC contracting to mitigate capital cost risk; and securing at least 50 per cent of its adjusted Ebitda from the project under fee-based arrangements. To date, Pembina has secured more than 40 per cent of its adjusted Ebitda under fee-based arrangements and is in ongoing discussions with potential customers to increase the percentage above 50 per cent.