Varcoe: Dow to speculate $8.8 billion in Alberta net-zero petrochemical undertaking

Varcoe: Dow to speculate $8.8 billion in Alberta net-zero petrochemical undertaking

The undertaking in Fort Saskatchewan is anticipated to create as much as 8,000 jobs through the peak of development, and 400 to 500 full-time positions

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It’s taken a while to cross the end line, however an $8.8-billion petrochemical mega-project in Alberta is about to maneuver forward, the primary of what may very well be a number of main decarbonization developments that faucet into federal and provincial incentive packages.

Michigan-based Dow confirmed Tuesday it has given the inexperienced mild to what it calls the world’s first net-zero built-in ethylene cracker and derivatives advanced, to be inbuilt Fort Saskatchewan close to Edmonton.

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The corporate, which first proposed the undertaking within the fall of 2021, stated its board of administrators made a constructive ultimate funding resolution (FID) on the US$6.5-billion improvement — a price-tag that doesn’t embody incentives from the provincial and federal authorities.

“It’s big. It’s an amazing factor for Alberta, at first, that it was chosen over varied different areas that Dow may construct this facility at,” stated Invoice Rawlusyk, government director of North American NGL markets with S&P World Commodity Insights in Calgary.

“It’s nice to have this sort of funding and a number of events actually labored collectively to make this FID resolution a actuality … By way of scale, it’s extraordinarily giant and positively world scale.”

A brand new convention on the announcement is anticipated to be held Wednesday, together with Dow CEO Jim Fitterling, Premier Danielle Smith and Deputy Prime Minister Chrystia Freeland.

Firm officers didn’t return calls Tuesday.

“The undertaking serves as a number one instance that industrial decarbonization is each doable and worthwhile,” Fitterling stated Tuesday in a information launch.

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Building on the event, which is able to triple Dow’s ethylene and polyethylene capability at its current petrochemical operations in Fort Saskatchewan, is anticipated to start out subsequent 12 months, with the event inbuilt phases.

The undertaking is anticipated to create as much as 8,000 jobs through the peak of development, and 400 to 500 full-time positions as soon as it’s working.

The undertaking will embody constructing a brand new ethylene cracker, and boosting its polyethylene manufacturing capability by two million tonnes each year.

Dow CEO Jim Fitterling
Dow CEO Jim Fitterling stated the undertaking is proof that “industrial decarbonization is each doable and worthwhile.” Michael Reaves/Getty Photos

The corporate stated the additional capability will let it seize high-value markets, together with packaging, infrastructure and hygiene.

Dow says the undertaking will convert the location’s cracker off-gas into hydrogen, used as a clear gasoline within the ethylene manufacturing course of. As well as, carbon dioxide emissions might be captured, shipped and saved off-site.

The undertaking will decarbonize about 20 per cent of its world ethylene capability, whereas boosting its world polyethylene provide by 15 per cent.

The primary section is anticipated to start working in 2027, with a second section coming on-line two years later.

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Dow particularly cited “the Canadian and Alberta benefit” for the rationale it is going to put money into the area.

Western Canada has giant volumes of low cost pure fuel feedstock, relative to different areas, in addition to cost-advantaged ethane.

The power is anticipated to be one among Dow’s most cost-competitive on the earth as soon as it’s absolutely operational, the corporate said within the launch.

“The area additionally options entry to current CO2 transportation and storage infrastructure with out there capability to completely assist decarbonization of the undertaking,” it stated

Alberta has various large-scale petrochemical, oil and fuel, cement and power-generation initiatives that has been proposed over the previous three years, as firms and the federal and provincial governments transfer to achieve net-zero emissions goal by 2050.

Nevertheless, many have been ready for the federal and provincial governments to unveil incentive packages to decarbonize, one thing that has occurred in current days — and will result in extra initiatives continuing.

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“This undertaking will spur future investments in Alberta that can assist flip the Alberta Industrial Heartland right into a globally essential industrial ecosystem,” stated Vitality Minister Brian Jean.

“This assertion of confidence by Dow will result in extra nice information.”

Ottawa introduced final week it is going to lastly introduce laws on its funding tax credit for carbon seize, utilization and storage (CCUS) initiatives, price as much as 50 per cent of eligible capital bills on tools.

(The province confirmed Tuesday it is going to provide 12 per cent grants on new CCUS developments.)

Beneath the provincial authorities’s current Alberta Petrochemicals Incentive Program (APIP), proponents already obtain grants price 12 per cent of a undertaking’s eligible capital prices, as soon as the event is working.

It’s anticipated the province’s contribution to the undertaking will exceed $1.1 billion.

Dow famous its Fort Saskatchewan undertaking would be the first initiative to entry the federal authorities’s new funding tax credit score program, whereas it additionally credited the provincial authorities and Fort Saskatchewan for offering incentives.

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“Our view on the Alberta undertaking is we’re working in an surroundings that’s supportive of decarbonization. There’s a value on carbon in Canada. There’s current carbon seize infrastructure,” Fitterling informed analysts throughout a current earnings name.

“And there’s clearly some funding credit for the hydrogen portion of the undertaking. And so these are all constructive.”

Through the name, he stated peak development will happen between 2025 and 2026.

Shruthi Vangipuram, a senior analysis analyst with vitality consultancy Wooden Mackenzie, famous the demand for ethylene and polyethylene is anticipated to stay sturdy within the medium to long run.

The Alberta website offers Dow with entry to low cost pure fuel and ethane provide within the area is projected to develop by greater than 30 per cent over the following decade, in keeping with Wooden Mackenzie estimates.

The power may also use Dow’s current website infrastructure, whereas incentives are being supplied by Alberta, he famous.

“Beginning up a web zero…cracker and derivatives advanced seals Dow’s place as a worldwide chief within the race to decarbonize plastics manufacturing,” Vangipuram stated in an e-mail.

The thought of attracting main funding in Alberta for a brand new ethane cracker, which converts uncooked ethane into ethylene — used as an enter in plastic manufacturing — has been eyed by the provincial authorities for years.

“There’s a number of a number of trades, a number of workforce that might be very pleased to be engaged on this undertaking,” Rawlusyk added.

“The actual fact each ranges of presidency had been keen to take part and make investments on this — and helped Dow get throughout the end line — with out them, I don’t suppose this might be constructed.”

Chris Varcoe is a Calgary Herald columnist.

[email protected]

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