In response to both the growth in propane production and the reduced export capacity, Keyera is developing an NGL rail terminal at Josephburg, near the Keyera-operated fractionation and storage facility in Fort Saskatchewan (KFS).
Propane is a natural gas liquid (NGL) and one of the key products produced from the fractionation1 of natural gas liquids. Higher prices for natural gas liquids relative to the price of natural gas have encouraged the development of more liquids-rich natural gas in western Canada, resulting in an increase in propane production. Propane is used in residential, commercial and industrial applications and is a common source of heating fuel for residences and businesses that are not serviced by natural gas pipelines. Keyera’s underground storage caverns are used to store propane in the summer months in order to meet winter demand.
Canada produces more propane than it consumes and exports the surplus, by pipeline and rail, to the United States. The Midwest is a primary export market for Canadian propane, and is also the U.S. region that relies most heavily on propane for home and space heating needs.
Until recently, the Cochin pipeline, operated by Kinder Morgan, was the major export pipeline that delivered Canadian propane into the U.S. Midwest. Given growing demand in the oil sands for condensate (another natural gas liquid, used as a diluent to allow bitumen to flow via pipeline), Kinder Morgan received approval to reverse the pipeline to allow for northbound condensate imports into Alberta. The Cochin pipeline stopped receiving propane at the end of March 2014, leaving a void in the propane export market.
The project involves construction of rail loading facilities, associated onsite working storage, and connecting pipelines to KFS. The targeted start-up date is mid-2015. Plans are also in the works to add truck loading capability and additional onsite storage. When fully operational, the Josephburg terminal will have capacity to load up to 40,000 barrels per day of propane for delivery by rail to markets across North America.
1 “Fractionation” should not be confused with “fracking”, which is short for hydraulic fracturing. Fractionation, as used here, is a separation process in which a stream of natural gas liquids is split into components (or fractions, including propane) through a distillation process at an NGL processing facility. Hydraulic fracturing, or fracking, on the other hand, is a well stimulation technique used by oil and gas producers in which a mixture of water, sand and chemicals is injected at high pressure into a wellbore to create small fractures in the rock formation and improve well productivity.