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Dec 14, 2020

Pembina suspending $4.5B Alberta petrochemical project indefinitely

Pembina suspending $4.5B Alberta petrochemical project indefinitely

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Pembina Pipeline Corp. and Kuwait’s Petrochemical Industries Co. are suspending work on a $4.5-billion joint venture to build an integrated propane dehydration plant (PDH) and polypropylene upgrading facility in Alberta.

“While Pembina continues to believe in the strategic rationale of this project, the significant risks arising from the ongoing COVID-19 pandemic, most notably with respect to costs under the lump sum contract for construction of the PDH plant, which remains under force majeure condition, require CKPC [Canada Kuwait Petrochemical Limited Partnership] to suspend execution of the project indefinitely,” the company said in a release Monday.

Calgary-based Pembina said it expects to book a material impairment on its investment in CKPC in its fourth quarter.

The company has a 50-per-cent interest in the joint-venture project near Edmonton. The project, which was given the green light with a positive final investment decision in Feb. 2019, was designed to turn propane into plastic pellets.

The company expected the facility to be in service by mid-2023 and generate annual adjusted net EBITDA (earnings before interest, taxes, depreciation, and amortization) of $275 to $350 million.

Pembina also said Monday it is planning $785 million in capital spending next year as it moves to restart work on two key projects.

The company said it will resume construction of the next phase of its Peace Pipeline expansion and go ahead with the restart of its Empress co-generation facility.

The pipeline expansion includes a new pipeline and associated infrastructure in the LaGlace-Valleyview-Fox Creek corridor in Alberta.

Pembina said the initial capacity has been reduced to 160,000 barrels per day from 240,000; however, the capital cost estimate has also been revised lower, by approximately $175 million, to $775 million.

The Empress co-generation facility will use natural gas to generate up to 45 megawatts of electrical power. The project is expected to cost $120 million.

With files from The Canadian Press