Canadian advantage:  Ridley Island’s planned 1.2 MMTPA capacity will allow Western Canada’s producers to sell propane to Asia from B.C. with transit time of 10 days vs. 25 days from U.S. Gulf coast

AltaGas Ltd. (ticker: ALA) announced a positive Final Investment Decision (FID) this week on its Ridley Island Propane Export Terminal, having received approval from federal regulators, the company said in a press release this week.

AltaGas Announces Positive FID on Ridley Island, Canada's First West Coast Propane Export Terminal

Source: Marine Conseravation

The Ridley Export Terminal is expected to be the first propane export facility on Canada’s west coast. The site is near Prince Rupert, British Columbia, on a section of land leased by Ridley Terminals Inc. from the Prince Rupert Port Authority. AltaGas has executed long-term agreements securing land tenure along with rail and marine infrastructure on Ridley Island, and will proceed with the construction, ownership and operation of the Ridley Export Terminal.

Shipping propane from Ridley Island will cut transit time by 60%

The locational advantage is very short shipping distances to markets in Asia, notably a 10-day shipping time compared to 25-days from the U.S. Gulf Coast. The brownfield site also benefits from excellent railway access and a world class marine jetty with deep water access to the Pacific Ocean.

“We are consulting and working with the First Nations whose traditional territory the Ridley Export Terminal is located within,” said David Harris, President and CEO of AltaGas. “Collaborating closely with First Nations and communities to create sustainable social value is of paramount importance to us and we look forward to a long and mutually beneficial relationship with the First Nations in the region.”

AltaGas Announces Positive FID on Ridley Island, Canada's First West Coast Propane Export Terminal

BC Premier Christy Clark, Photograph by Diana Nethercott

“The project is a reflection of how we do business in B.C. – balancing environmental protection with economic development, creating opportunities and real partnerships with First Nations, and putting British Columbians first,” said Premier Christy Clark. “This export facility is another promising development for our province, connecting producers in northeast B.C. to markets in Asia.”

AltaGas Announces Positive FID on Ridley Island, Canada's First West Coast Propane Export Terminal

Source: AltaGas

The Ridley Export Terminal will be designed to ship 1.2 million tonnes of propane per year and is estimated to cost approximately $450 – $500 million. Along with FID, AltaGas will be offering a third party the option to take an equity position of up to 30 percent in the Ridley Export Terminal.

“Propane exports off of Canada’s west coast pulls together our vision of offering Canadian producers a complete energy value chain,” said Harris. “Together with our northeast B.C. infrastructure, once the Ridley Export Terminal is built and operating, we will give producers new access to premium Asian markets for their propane.”

Based on production from its existing facilities and forecasts from new plants under construction and in active development, AltaGas anticipates having physical volumes equal to approximately 50 percent of the 1.2 million tonnes. The remaining 50 percent is slated to be supplied by producers and aggregators in western Canada. AltaGas expects to underpin at least 40 percent of the Ridley Export Terminal throughput under tolling arrangements with producers and other suppliers.

As previously announced on May 24, 2016, AltaGas LPG Limited Partnership entered into a Memorandum of Understanding with Astomos Energy Corporation contemplating a multi-year agreement, for the purchase of at least 50 percent of the 1.2 million tonnes of propane available to be shipped from the Ridley Export Terminal each year. A definitive agreement has been finalized with Astomos, containing the key commercial terms for the sale and purchase of these volumes of propane, AltaGas said. Astomos is a Tokyo-based energy company formed by the merger of the LPG divisions of Idemitsu Kosan and Mitsubishi Corporation in 2006.

Commercial discussions with Astomos and several other third party offtakers for further capacity commitments are proceeding, AltaGas reported.

AltaGas began the formal environmental review process in early 2016, working closely with First Nations throughout the process and it will continue to do so as it moves forward with the Ridley Export Terminal.

Construction is expected to begin in early 2017, and the Ridley Export Terminal is expected to be in service by the first quarter of 2019. AltaGas estimates that 200 to 250 construction workers will be hired during the construction phase and 40 to 50 permanent jobs created once the facility is operational.

Propane market primer

Liquefied Petroleum Gas (LPG), chiefly propane and butane, is an energy source which can be used in households, vehicles, factories, and other user applications. LPG is recognized as a clean energy source that is highly portable. In Japan, LPG is considered ‘the last resort of the energy security. Due to its portability and environmental performances, LPG is very useful in the areas hit by earthquakes and other disasters. LPG was a lifeline for people who were struck by the huge Earthquake which hit Japan in 2011,” according to Astomos, Ridley’s primary offtake customer for LPG.

AltaGas Announces Positive FID on Ridley Island, Canada's First Opportunity to Ship its Propane Directly to Asia

Graph: NEB

Historically Canada has sold its propane to U.S. buyers. According to Canada’s National Energy Board reports, from 2009 to 2014, roughly 14 per cent of Canadian propane exports were delivered to PADD V. By the second half of 2015, the percentage of propane exports to PADD V had more than doubled to 29 per cent. The addition of propane export capabilities at the Petrogas facility in Ferndale, Washington, is likely the reason for this leap in Canadian propane exports to PADD V, the NEB said. Petrogas is exporting approximately 35 Mb/d of propane and butanes.

AltaGas Announces Positive FID on Ridley Island, Canada's First Opportunity to Ship its Propane Directly to Asia

Map: NEB

The development of new export capacity in the U.S. Gulf Coast since winter 2013/14 has contributed to continued strong U.S. export growth. Propane exports in 2015 averaged 616.2 Mb/d, more than double the average of 301.1 Mb/d reported in 2013. Approximately 50 per cent of U.S. propane production is now being exported, the NEB reported.

But propane is also being exported from the U.S. West Coast via the Petrogas export facility in Ferndale, Washington. Ferndale started exporting propane to Asian markets following the completion of an expansion in April 2015. Previously, the Petrogas facility had exported only butanes.

Asia has been a significant market for U.S. propane exports, particularly in 2015, when exports to Asia tripled from 2014 levels. The NEB reports that the Asian market now accounts for roughly a third of U.S. propane exports.

AltaGas Announces Positive FID on Ridley Island, Canada's First Opportunity to Ship its Propane Directly to Asia


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