$1-billion petrochemical plant expansion will be good for the province—but only after jumping a few hurdles
Construction is underway on an approximately $1-billion expansion of NOVA Chemicals Corporation's Polyethylene 1 (PE1) plant at the company's Joffre, Alta. petrochemical complex. The project has earmarked $900 million for its capital cost. Start-up and commissioning spending in the fall of 2015 is expected to bring the total tab to nearly $1 billion. Ledcor Projects Inc. is the general contractor.
The PE1 expansion will include what NOVA describes as a world-scale polyethylene reactor (R3), adding to the two existing reactors, commonly referred to as production trains.
"The new reactor is called world-scale because of the size. You have to build at this scale to be competitive," explains Rick Van Hemmen, manufacturing director for western Canada at NOVA.
R3 has been designed to produce between 950 million and 1,100 million pounds of linear low-density polyethylene per year, adding roughly 40 per cent more polyethylene production capacity at PE1. "The existing capacity is 1.5 billion pounds per year, and this will bring it to 2.56 billion," Van Hemmen says.
Based on size, the Joffre complex has certainly been competitive. It is an integrated polyethylene and ethylene—the feedstock for polyethylene—facility that includes three ethylene plants and two polyethylene plants. While it's no longer the largest site globally, as it was in 2001, the complex is still the biggest of its kind in North America.
Although more railcar storage space at the existing rail yard north of the site and a new electricity substation are part of the proposed infrastructure, the PE1 expansion is nearly all within the site's existing footprint. Interconnection approval from the Alberta Electric System Operator for a potential 33 megawatts of extra load to the grid was received in February, and a regulatory application for the substation was scheduled for this summer, according to a project fact sheet from NOVA Chemicals. The additional load will be provided by the existing co-generation facility at the site. No additional off-site transmission lines will be needed.
Other related infrastructure for the expansion includes an additional flare stack and cooling tower to be integrated within PE1, plus on-site rail track for about 450 railcars to accommodate the expected 30 per cent increase in rail traffic in and out of the site.
COMPETING FOR MANPOWER
A June project update from NOVA observes, "As there is significant competition for construction resources in Alberta, we are working with our contractors to actively promote our project and encourage the central Alberta workforce to choose our site."
It is a two-way street, some might say. The PE1 construction project surely confers benefits to the provincial economy. Some 40–60 per cent of the capital cost is to be spent in Alberta, the majority for direct labour.
But it is just possible that the challenges alluded to in NOVA's June update could have stymied the project altogether, despite the increased global and North American demand for product.
"Our research shows that it is considerably more costly in Alberta to build this type of plant from scratch, compared to elsewhere. Cost certainty is always an issue. If we had not got the existing capacity in ethylene, the decision to build would have been much more difficult," Van Hemmen says.
In a project like this, he says, labour is a major part of the total capital cost. Although labour costs are lower in central Alberta than in the Fort McMurray region, they are still higher than at most comparable sites elsewhere in North America.
Fortunately, a number of factors were in play to tip the decision in favour of the expansion. The scale of the expansion is relatively modest, Van Hemmen says, and the presence of existing infrastructure helps. Also, the project's central Alberta location means good access to labour.
Construction will average about 250 tradespeople with a peak workforce of up to 600 from late 2014 to perhaps mid-2015.
The drop in natural gas production in Alberta over the last decade or so could have posed a feedstock supply challenge for the expansion, as ethane is traditionally extracted from natural gas streams for the production of ethylene and polyethylene. Also, variability in the natural gas supply because of the ups and downs of the commodity's annual demand cycle can limit feedstock supplies, as the ethane component is quite small.
But two new "non-traditional" sources are taking care of the potential shortfall—shale oil off-gasses from the Williston Basin and ethane from oilsands production. "These are providing a steadier supply than natural gas, which is subject to seasonal variables. The new sources are now playing a crucial role. At a rough estimate, they now account for 20–25 per cent of the total ethane feedstock supply to the site," Van Hemmen says.
The new feedstock supply will also turn existing underutilized ethylene production capacity into full production once the expansion is running. With a secure feedstock supply, ethylene production at the site will increase without any extra capital required.
The scope of the project includes piling, concrete, structural steel, module assembly, piping, mechanical, electrical and instrumentation. "We're really taking it from the ground up. There are few subcontractors. We self-perform the vast majority of our work," says Alex Lauchlan, Ledcor's project manager for PE1.
The project, which Lauchlan says is comparable in scale to some single-phase expansions in the oilsands, will have, however, a higher ratio of steel than what is typical in the Fort McMurray area. "It's due to large vertical structures [for the Joffre site expansion]. They use a lot of steel for vertical vessels that are surrounded by structural steel," Lauchlan says.
NOW YOU KNOW
Ledcor's facility in Nisku, Alta., will build 51 modules for NOVA Chemicals Corporation's Polyethylene 1 Expansion Project. The biggest module will be 100 feet long, 20 feet high and 20 feet wide.