August 18, 2016, RBN Energy, Housley Carr- The availability of vast amounts of ethane from the nearby “wet” Marcellus and Utica plays is spurring a petrochemical rejuvenation in Sarnia, ON. Two years ago NOVA Chemicals stopped using naphtha as a feedstock at its 1.8 billion pound/year ethylene plant in Sarnia’s Chemical Valley and now relies on a combination of ethane, propane and butane. Next year the company is planning to complete the plant’s conversion to 100% ethane and is considering the possibility of building a big polyethylene plant nearby. Today, we continue our comprehensive review of southwestern Ontario’s NGL, petchem and refining infrastructure, including Sarnia’s NGL fractionation, storage and end-use markets.
As we said in Part 1 of this series, Sarnia has been a major player in crude oil, refining and petrochemicals for well over a century. An 1858 oil well in nearby Oil Springs, ON is said to have been the first on the continent, and over time, oil-production, refining and petchem infrastructure was developed in southwestern Ontario (as were pipelines and railroads). Sarnia’s role as a major refining/petchem player continues to this day, decades after most oil production in southwestern Ontario dried up. In Part 2, we looked at the crude oil side of things, describing the three refineries in Chemical Valley, the oil pipelines that supply them, and the petroleum-products pipelines that help move the refineries’ output to market. In today’s episode, we turn to Sarnia’s important NGL sector: the pipelines that transport purity ethane and mixed propane/butane to Chemical Valley, the fractionator that separates mixed NGLs into purity products, the NGL storage facilities, and the big ethylene plant that “cracks” ethane, propane and butane into ethylene –– a critically important petchem building block.
Sarnia is located near the southern tip of Lake Huron, just across the St. Clair River from southeastern Michigan. The city is within what you might call a petchem/marketing sweet spot, in that (from a feedstock-sourcing perspective) it is close to the NGL-rich wet Marcellus/Utica region (eastern Ohio, western Pennsylvania and northern West Virginia) and (from a market perspective) it is within 500 miles of half the population of North America –– in other words, close to a few hundred million people who use all kinds of ethylene-based plastics and other products. Sarnia also has a century’s worth of pipelines, refineries and other supportive infrastructure, most of which have undergone major upgrades and changes in recent years in response to tightening environmental regulations and –– just as important –– major developments such as the recent boom in NGL production in the Marcellus/Utica across Lake Erie. Sarnia also has geology on its side; southwestern Ontario and nearby southeastern Michigan sit atop subsurface salt formations that allow for the creation –– or “washing” –– of huge underground storage caverns that are ideal for storing NGLs and petrochemicals (see Smoky and the Salt Caverns).
As we’ve noted in several blogs (including Only Time Will (Sh)ell, Ain’t Wastin’ Time No More, and our Join Together With Demand series), NGL production in the northeastern U.S. has risen sharply in the past few years, particularly since 2013 when a number of natural gas producers, stung by falling gas prices, shifted their focus to NGL-rich wet Marcellus and Utica counties to get a financial boost from NGL production and sales. Midstream companies are still struggling to provide enough NGL takeaway capacity out of the plays. Each NGL “purity product” has its own pluses and minuses. For example, ethane (C2, because it has two carbon atoms per molecule) has the benefit of being able to be “rejected” into natural gas (for a primer on ethane rejection, see You Ain’t Seen Nethane Yet), but 1) there are limits on how much ethane can be rejected, 2) if ethane is separated into a purity product its only real use is as a feedstock in ethylene plants (also known as steam crackers), and 3) purity ethane can only be transported via highly pressurized pipeline. There are now three pipelines out of the Marcellus/Utica for ethane, namely Enterprise Products’ 125-Mb/d Appalachia-to-Texas (ATEX) Pipeline to Mont Belvieu, TX (a major NGL storage hub near many steam crackers); Energy Transfer/Sunoco Logistics’ 70 Mb/d Mariner East pipeline to an export terminal at Marcus Hook, PA (near Philadelphia); and Energy Transfer/Sunoco’s 50 Mb/d Mariner West pipeline from Houston, PA (near Pittsburgh) to Sarnia. (More on Mariner West –– and the proposed Utopia Pipeline –– in a moment.) Propane (C3) and butane (C4) pose challenges of their own. Most important, they can’t be simply rejected into natural gas –– they need to be transported to market, and since there is little C3/C4 pipeline takeaway capacity in place in the Marcellus/Utica, any surplus volumes of propane and butane need to moved out by rail (an expensive proposition).
Now, let’s talk Sarnia. We begin with the epicenter of the Chemical Valley’s petchem sector, NOVA Chemicals’ 1.8 billion pound/year Corunna cracker (largest kelly green rectangle in Figure 1) –– it came online in 1977, was purchased by NOVA in 1988, and relied on oil-based naphtha (from a crude/condensate topping unit at the NOVA site) as its primary feedstock until 2006 and its partial feedstock source until 2014. Like other ethylene producers, NOVA has been adjusting to the changing dynamics of cracker feedstocks by moving away from naphtha and toward liquefied petroleum gases (LPGs/propane, butane) and ethane (see RBN’s Drill Down report on steam cracking and cracker economics, What’s Crackin’ with Steam Crackers for an in-depth look), and revamping its ethylene plant as it went along. First it retooled some of its cracker furnaces to allow a feedstock switch from naphtha to propane and butane (in 2006), and then it reworked its feedstock capabilities to allow a switch to more than two-thirds ethane in November 2014 –– that’s when Mariner West started piping Marcellus/Utica ethane to Sarnia. Today the cracker feedstock mix at NOVA is about 37 Mb/d of ethane and 17 Mb/d of propane and butane.
NOVA was able to make the transition to LPGs and ethane due to Sarnia’s robust pipeline and storage infrastructure, shown in Figure 1 below. The map shows Sarnia’s railroad line access (Canadian National/CN and CSX), the three Sarnia refineries we discussed in Part 2 (Imperial, Shell and Suncor), the Plains/Pembina fractionator, NOVA’s petchem plant, the Pembina Corunna NGL storage facility, NGL storage facilities across the border in Michigan (DCP Marysville and Plains St. Clair) and some of the pipelines connecting all of these facilities.
Currently NOVA receives all its ethane from the Marcellus/Utica via the Mariner West pipeline (bright blue line in Figure 1). Ethane can be stored at DCP Midstream Partners’ Marysville (MI) NGL Storage facility (medium blue rectangle) across the St. Clair River from Sarnia. Marysville, a big salt cavern facility used primarily to store propane, was expanded in 2014 to enable storage of up to 1 MMbbl of ethane. NOVA also can store ethane at the Pembina Corunna facility (orange rectangle), which is located next to the NOVA cracker.
Ethane gets to the NOVA plant on an ethane-only pipeline (orange line in Figure 1) that is part of the NOVA-owned Genesis NGL pipeline network. That ethane-only pipeline can move ethane either directly to the NOVA ethylene plant or to Pembina Corp.’s Corunna NGL Storage facility. Pembina Corunna is a former Dow Chemical facility that also stores various NGLs and petrochemicals in salt caverns; the site’s storage capacity (in eight or nine caverns) totals about 5 MMbbl, some of which is set aside for ethane.
A substantial portion of NOVA’s propane and butane supplies are delivered by rail, these days mostly from the Marcellus/Utica region. (The railroads in Figure 1 are shown as thin gray lines.) DCP’s Marysville NGL Storage can receive railed shipments of propane and butane, as can Pembina Corunna, which has a 16-spot rail loading/unloading facility (and the ability to store up to 48 rail tankcars), and NOVA itself. The balance of NOVA’s current propane and butane needs is piped in from Alberta on Enbridge’s Line 5 (light purple line in Figure 1). Figure 2 below shows what’s involved in these piped deliveries. Mixed NGLs (also known as Y-grade) produced from natural gas processing in Alberta are run through fractionators there (orange diamond in left of Figure 2) that separate out ethane and most of the natural gasoline (C5). The remaining mixed NGLs (propane/C3, butane/C4 and small amounts of natural gasoline/C5) are sent in batches on Line 5 (alternating with light crude oil flows; see Refined, Piped, Delivered –– They’re Yours for an explanation of how batching works) to Enbridge’s Sarnia Terminal (red triangles in upper right of figures 1 and 2). From there, the mostly C3/C4 mix is separated into purity propane and butane at an adjoining 100-Mb/d Sarnia fractionator (orange diamonds in upper right of figures 1 and 2) that is owned jointly by Plains All American (with an 82% share) and Pembina (with 18%). Plains runs the fractionation plant. The resulting propane and butane is either sent to Marysville, Pembina Corunna or Plains’ St. Clair (MI) storage facility (dark green rectangle in Figure 1) for storage for later use at NOVA, or for loading onto rail cars, trucks and to local pipelines for shipment elsewhere, mostly into the commercial/residential market and to the Sarnia refineries (for winter butane supply).
In the next episode in this series, we will consider NOVA’s plan to further rework its ethylene plant in 2017-18 to allow the furnaces that crack propane and butane to crack ethane. When that project is complete, the plant’s sole feedstock will be ethane piped in from the Marcellus/Utica –– the cracker’s need for propane and butane will end (possibly affecting the prospects for the Plains/Pembina fractionator and other Sarnia infrastructure). As we will discuss, for supply-diversity’s sake, NOVA is planning to broaden its ethane sourcing to two pipelines: the existing Mariner West, and the planned 50-Mb/d Utopia Pipeline from eastern Ohio to southeastern Michigan, which is expected to come online in 2018. There, Utopia will tie into the Cochin Pipeline, which will move ethane to Windsor, ON, and from there to Plains’ Windsor-Sarnia Pipeline (WSP; aqua-blue line in lower right of Figure 1), which will move ethane to NOVA and/or Pembina Corunna in Sarnia. Enough for now. Go. Rest. More on Sarnia coming soon.