Updated March 2017
The continued focus by producers on producing natural gas in liquids-rich areas has resulted in an oversupply of propane in the Alberta market. This has been compounded by the reversal of the Cochin pipeline, which previously exported Alberta propane to markets such as the U.S. Midwest and Gulf Coast. As a result of the oversupply and subsequent low prices, producers have opted to leave components of the natural gas liquids, including propane, in the gas stream as a mix to be removed from Alberta.
Figure S6.3 [Tableau] shows that propane production is forecast to moderately increase through to 2026. The increased production and low prices have resulted in infrastructure investments in two new propane dehydrogenation projects, schedule to come on stream in 2021. The North West Redwater Partnership Sturgeon refinery, scheduled to be in service in 2017, will add very small amounts of propane to the production total.
Demand for propane is seasonal as it is used as a fuel in remote areas for space and water heating, as an alternative fuel in motor vehicles, for grain drying, and for barbecues. In 2016, above-average temperatures in North America resulted in lower propane demand for household and commercial heating.
In 2016, the Government of Alberta announced the Petrochemicals Diversification Program, a royalty credit program that allocated $500 million to new facilities using methane and propane as a feedstock. The program provided further support to the propane dehydrogenation facilities projected to come on stream in 2021, increasing demand for propane. In addition, the current pricing and availability of low-cost propane have encouraged numerous operators to invest in infrastructure to expand capacity in Alberta’s propylene and polypropylene market. As a result, demand for propane is projected to grow over the forecast period, reaching 8.5 103 m3/d (53.6 103 bbl/d) in 2026.
Propane is also used as a solvent in steam-assisted gravity drainage (SAGD) bitumen production, resulting in reduced carbon emissions and lower water and energy consumption. Propane use in SAGD accounted for an estimated 18.6 per cent of the provincial total propane demand in 2016.
In October 2016, AltaGas Ltd. received approval from the National Energy Board for a 25-year licence, subject to the approval of the Governor in Council, to export up to 2.7 106 m3 per year of propane out of Prince Rupert, British Columbia. If this new export outlet occurs, Alberta propane will be transported to B.C. and exported to Asian markets; however, since no final investment decision has made, the project has not been included in the forecast.