Canadian Petrochemical Sector

Competitiveness

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Canadian Energy Research Institute

Founded in 1975, the Canadian Energy Research Institute (CERI) is an independent, registered

charitable organization specializing in the analysis of energy economics and related environmental

policy issues in the energy production, transportation, and consumption sectors.

Our mission is to provide relevant, independent, and objective economic research of energy and

environmental issues to benefit business, government, academia and the public.

CERI publications include:

• Market specific studies

• Geopolitical analyses

• Quarterly commodity reports (crude oil, electricity and natural gas)

In addition, CERI hosts a series of study overview events and an annual Petrochemicals Conference.

Overview

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Core Funders:

Donors:

In-kind:

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Agenda

• Canada’s Competitive Position of Petrochemical Facilities

• Methane as a Feedstock

• Market Challenges

• Conclusions

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Relative Costs of a New Liquids Petrochemical Facility

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Relative Costs of a New Liquids Petrochemical Facility,Including USGC Project-Specific Rebate

0

10

20

30

40

50

60

70

80

90

100

USGC Sarnia,Ontario

AlbertaIndustrialHeartland

USGC RebateExample

Saudi Arabia -foreign

Saudi Arabia -national

Co

st a

s %

of

USG

C C

ost

Wit

ho

ut

Reb

ate

Capital Costs Operating Costs

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Methane Derivatives

Synthesis Gas (Syngas)

Hydrogen (H2)

AmmoniaNatural Gas (N.G)

Urea

Formaldehyde

Acetic Acid

Methyl tert-butyl ether (MTBE)

Dimethyl ether (DME)

Methylamine

Methanol to Olefins (MTO)

Methanol to Propylene (MTP)

Methanol to Gasoline (MTG)

METHYL METHACRYLATE (MMA)

Fischer-Tropsch Process

Methanol (MeOH)

Liquified Petroleum Gas

(LPG)

Methane (CH4)

CO2

Natural gas liquids(NGLs)

Credit potential if sequestered?

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Methane Derivatives Project Economics

Applying the new US Corporate Tax Code improves the IRR of Hydrogen and Methanol by 1.7% and 1.5%, respectively.

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Sample Netback Calculations

Applying the new US Corporate Tax Code improves the IRR of Hydrogen and Methanol by 1.7% and 1.5%, respectively.

$0 $200 $400 $600 $800 $1,000

Methanol

Polypropylene

USD/tonne

Alberta USGC

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Market Challenges

• Market Access

• US Gulf’s Competition

• Lengthy Regulatory Process

• Level of Integration in Petrochemical Clusters

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Concluding Remarks

• New capacity for ethylene, propylene and methanol follows energy and demand growth dynamics.

• Newly built liquid and solid petrochemical facilities are more competitive in AB than in ON.

• Results show that some opportunities exists for methane derivatives sub-sector in Alberta. This is driven principally by 10-15% low feedstock prices, OPEX and corporate taxes.

• CO2 taxes based on custom approaches for trade exposed industries seems to sustain economic competitiveness against the USGC.

• New natural gas feedstock demand – 0.5 bcfd.

• The new US Tax Code makes USGC the most competitive jurisdiction. For example, it improves the IRR of Hydrogen and Methanol by 1.7% and 1.5%, respectively.

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