Canadian propane: So close yet so far

Author Yulia Golub, Reporter

Flows of propane from Canada may change as more west coast export capacity comes online. Will exports to the US continue to decline?

The US may not be able to rely as heavily on its neighbor to the north for propane in the coming years as new export capacity in western Canada diverts shipments to higher-priced destinations in Asia and Latin America. 

In May 2019 after AltaGas brought online its 40,000 b/d Ridley Island propane export terminal (Ripet) in British Columbia— the first propane export facility in Canada — propane exports began to gradually shift from US markets to seaborne exports, while railed shipments to Mexico grew.

This trend is expected to continue in 2020 as AltaGas plans to almost double Ripet’s export capacity this year. At the same time Mexico and Latin America will play an even more significant role in Canadian exports as Pembina brings online its 25,000 b/d Prince Rupert LPG export terminal in British Columbia in mid-2020. The terminal will be focused on southbound shipments to Latin America and will be expanded in the coming years. 

Southbound propane flows could change even further as more domestic demand is expected to come online. Demand will come from new propane dehydrogenation units from Inter Pipeline and Pembina — which will consume 20,000 b/d and 23,000 b/d of propane respectively — and their associated polypropylene units in Alberta. These projects are also expected to leave less surplus production available for export to the US as producers will continue to switch their focus on exports to higher-priced markets outside of the US where domestic supply remains ample.

Inter Pipeline’s project is scheduled for completion by the end of 2021 and Pembina expects its facility to be online in the second half of 2023.

Canadian propane producers plan to keep up with increasing export and domestic demand. While some market participants expect Canadian propane and butane markets to start tightening this year, Canadian Energy Regulator forecasts Canadian propane production to almost double by 2040 to 392,000 b/d from 152,000 b/d in 2010.