Market Snapshot: Petrochemical growth in Alberta can bring significant changes to western Canada’s ethane market

Release date: 2024-10-30

From ethane to plastic products

Raw natural gas production includes methane, impurities, and various amounts of natural gas liquids^Footnote 1 including ethane, which can vary depending on the geography and chemical compositions of gas reservoirs. Some of the ethane in natural gas is extracted at large gas-processing facilities located on major natural gas pipelines in Alberta and B.C.^Footnote 2 A small amount of ethane is also produced from oil sands off-gas processes. Alberta’s supply of ethane comes from domestic production as well as imports^Footnote 3 of ethane from the U.S.

Once produced, ethane is transported in liquid form to petrochemical facilities via pipeline. These facilities turn the ethane into ethylene, polyethylene, and other derivatives, via processes such as cracking. These intermediate products are then transported to various chemical plants and manufacturers in Canada or internationally via truck, rail, or marine vessels, and are used to make numerous consumer products such as bottles, paint, clothing, antifreeze, and detergents (Figure 1).

Figure 1: Ethane lifecycle process

A new petrochemical facility in Alberta

On 29 November 2023 Dow Canada reached a positive final investment decision on its Path₂Zero project—a net-zero emissions, integrated ethylene cracker and derivatives facility^Footnote 5 in Fort Saskatchewan, Alberta. Path₂Zero will increase Dow’s polyethylene and ethylene derivatives production capacity by about 3 million metric tonnes per year, helping supply growing global demand for plastics, including polyethylene.^Footnote 6 Construction for this project^Footnote 7 is currently underway^Footnote 8, with construction^Footnote 9 expected to be completed in 2029.^Footnote 10

Ethane disposition^Footnote 11 and supply in Canada

Ethane is used primarily in the petrochemical industry and very minimally in oil sands projects.^Footnote 12 The Path₂Zero^Footnote 13 petrochemical facility will require significant ethane feedstock – an estimated 120,000 barrels a day – which will significantly increase Canada’s ethane consumption (Figure 2). The CER’s Canada’s Energy Future 2023 (EF2023) report assumes Path₂Zero would go ahead as planned in all its scenarios, including both net-zero scenarios.^Footnote 14 In all scenarios, total ethane demand grows with construction of this facility and remains stable thereafter.

Canada’s ethane supply is from domestic production and pipeline imports from the U.S . Historically, in general the amount of ethane that is extracted from natural gas in western Canada^Footnote 15 equals what is needed to meet disposition after factoring in imports and minimal industrial production.

Figure 2: Ethane disposition and supply balance for EF2023 scenarios: Current Measures, Canada Net-Zero, and Global Net-Zero

Production of liquids-rich tight natural gas has increased in western Canada in recent years, particularly from the Montney Formation.^Footnote 16 This has led to a significant increase in the availability of ethane. Demand for ethane has not increased along with it however, and increasing amounts of ethane are being left in the natural gas stream. This is shown by the grey wedges in Figure 2’s supply charts. Over the projection period natural gas production levels vary greatly between the three scenarios, which also means the amount of ethane available for extraction from natural gas varies greatly. The lower levels of natural gas production in the net-zero scenarios means not enough domestically sourced ethane is available to meet remaining demand.^Footnote 17 In these scenarios, increased imports into western Canada from the U.S. are needed to meet demand from the petrochemical industry in western Canada (the light purple wedges in Figure 2’s supply charts).

Date modified:

2024-10-30