Inter Pipeline to acquire Williams natural gas assets at steep discount

Inter Pipeline to acquire Williams  natural gas assets at steep discount
Under the deal announced Monday, Inter Pipeline will acquire two natural gas liquids plants in Fort McMurray, a gas processing plant near Redwater and a 420-kilometre pipeline network linking the facilities.

The company will also assume responsibility for a proposed $1.85-billion propane facility that would produce propylene, a compound used in the production of plastics.

Inter Pipeline president and CEO Christian Bayle said the company is buying “unique and attractive” assets in a down market and “well below” the initial cost.

“This positions Inter Pipeline to significantly benefit as energy prices strengthen,” Bayle said in a release.

The $1.35-billion price tag represents a 45 per cent discount from the initial cost, the company said.

Oklahoma-based Williams Cos. began seeking a buyer for its Canadian assets after a proposed takeover of the company by Dallas-based Energy Transfer Equity LP collapsed in June.

Williams and its master-limited partnership, Williams Partners LP, will use proceeds of the sale — expected to close in the third quarter — to pay down debt.

The two plants in Fort McMurray extract natural gas liquids and synthetic petrochemicals called olefins from off-gas, a byproduct of bitumen upgrading.

The fractionator near Redwater, northeast of Edmonton, separates the natural gas liquids and olefins into propane, propylene and butane, among other products.

If the deal goes ahead, Inter Pipeline would secure Williams’ long-term agreements with Suncor Energy and Canadian Natural Resources Ltd. to supply the extraction plants with off-gas from their upgraders.

Williams had pioneered the process of extracting natural gas liquids and olefins from off-gas.

It has spent $250 million preparing for the proposed propane dehydrogenation facility, which would produce 525,000 tonnes of propylene per year. 

Inter Pipeline expects to make a final decision on the petrochemicals project by the end of the year and, if it gives the green light, plans to have the facility operating by 2020.

Williams had applied for incentives under the Alberta government’s $500-million petrochemical program, designed to expand the industry. The program will offer royalty credits, which petrochemical companies can pass on to natural gas suppliers.

The province is considering 16 applications and plans to narrow the list down to two or three projects. Officials are expected to announce new details on the program within the next month or so.

“Alberta is a particularly attractive location for a world-scale PDH (propane dehydrogenation) facility given the ample supply of low-cost propane feedstock,” Bayle said in the release.
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