Canada-based Pembina Pipeline and Kuwait-based Petrochemical Industries (PIC) announced that the Canada Kuwait Petrochemical (CKPC) has executed a lump sum engineering, procurement and construction (EPC) contract to the construct a propane dehydrogenation (PDH) facility.
The new PDH facility is planned to be constructed within an integrated PDH and polypropylene (PP) upgrading facility (PDH/PP Facility) in Canada.
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 announces 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. 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.
CKPC has selected Heartland Canada Partners, a 50/50 partnership between Fluor Canada Ltd. (Fluor) and Kiewit Construction Services ULC (Kiewit) 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 percent of its adjusted EBITDA from the project under fee-based arrangements. To date, Pembina has secured more than 40 percent of its adjusted EBITDA under fee-based arrangements and is in ongoing discussions with potential customers to increase the percentage above 50 per cent.
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