A lethal mix of low global energy prices and the COVID-19 pandemic has delivered a blow to Alberta’s Industrial Heartland.

On Wednesday, March 18, Pembina Pipeline announced it was deferring its investment of $2.7 billion into its joint-venture project with Kuwait’s Petrochemical Industries Company K.S.C. (PIC) to build a $4.5-billion polypropylene complex in Sturgeon County.

In a partnership named Canada Kuwait Petrochemical Corporation (CKPC), the integrated propane dehydrogenation (PDH) plant and polypropylene (PP) upgrading facility was supposed to operational by mid-2023 and process 23,000 of Alberta propane per day to produce more than 550,000 tonnes of recyclable plastics pellets each year, which would be used for a variety of finished products such as automobiles, medical devices, food packing and home electronic appliances.

“In light of the rapid and significant decline in global energy prices and uncertainty as to the duration of this downturn, Pembina has made the prudent decision to defer some of its previously announced expansion projects to reflect the current market reality,” stated the release.

A lot can change in mere months as Stu Taylor, Pembina’s senior vice president, marketing and new ventures and corporate development said he was excited about the project during Alberta’s Industrial Heartland Association’s (AIHA) annual stakeholder meeting in January. At the time, he reported workers already had the ground cleared and highway and intersections upgrades were supposed to be completed by spring to accommodate the construction boom in the area.

“We’re excited to get going quickly with construction and hopefully be at the same stage in construction as (Inter Pipeline Ltd.) very soon,” Taylor told the AIHA crowd on Jan. 30.

The project would have created more than 3,000 construction jobs, 200 full-time operational and head office jobs, and millions in regional GDP.

The multi-billion-dollar project by CKPC had received major backing from government, with $49 million from the federal government’s Strategic Innovation Funding and $300 million in royalty credit from the province through the Petrochemical Diversification Program.

Investors are assessing capital investment plans to ensure growth projects are aligned with efforts to protect communities, employees, customers and investors during this unprecedented time, explained Alberta’s Industrial Heartland Association’s executive director Mark Plamondon.

“AIHA continues to work closely with investors to highlight the value proposition in Alberta’s Industrial Heartland and we continue to work with government to identify meaningful tools that will bring investors to Alberta. The longterm fundamentals still remain strong for our jurisdiction and we are confident that investors will continue to look at growth projects in our region,” Plamondon told The News.

Sturgeon County Mayor Alanna Hnatiw told The News that the municipality is disappointed in the delay but understands why Pembina is hitting the pause button.

“It is necessary to assess the current market situation as well as health and safety conditions for workers. Pembina is a great community partner and a strong business. We look forward to working with them on the CKPC development when the time is right,” Hnatiw said.

While not located in Alberta’s Industrial Heartland, other deferred projects by Pembina include the $1.55 billion Peace Pipeline Phase VII, VIII and IX expansions, the $175 million Prince Rupert terminal expansion, and $120 million Empress co-generation facility. These projects were supposed to come into service between 2021 and 2023. Additional discretionary capital spending was also removed from Pembina’s 2020 capital budget.

In total, the cuts account for a reduction of $900 million to $1.1 billion, or approximately 40 to 50 percent, of the company’s previously announced 2020 capital budget of $2.3 billion.

Any remaining capital spending will be injected into constrained segments of the pipelines to ensure maximum flexibility to meet their clients’ needs and fulfill existing producer volume commitments.

“Pembina’s business is resilient and remains strong in the face of these current challenges. An unwavering commitment to our financial guardrails has been a guiding principle for many years and, as a result, Pembina is well-positioned. These guardrails, in addition to actions recently taken, highlight our ability to preserve our already strong balance sheet while funding our ongoing business, including the reduced 2020 capital program,” said Scott Burrows, Pembina’s senior vice president and chief financial officer.

The company stated in the short-term, it will focus its energies on creating additional incremental pipeline capacity with minimal capital spending and support producers’ production growth.

lmorey@postmedia.com

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EDITORS NOTE: Sturgeon County Mayor Alanna Hnatiw’s comments were added on March 27, as they were received after publication deadline. The comments are only reflected in the online version of the story.