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By Maureen McCall
The Ridley Terminal Propane Export Terminal – the first on Canada’s West Coast to export cleaner-burning propane from BC and Alberta to Asia is on time and on budget. Commercial operations are on track to start April 1, 2019. It’s been endorsed by BC Premier John Horgan last year as “an excellent model for the Province’s vision of expanding sustainable resource production, creating long-term jobs and fueling local economic development.”
We sat down with Jamie Fisher, Director of Energy Exports at Altagas and part of the project team developing the Ridley Island Propane Export Terminal at an industry event this week and got an update on the progress of construction.
Jamie- What is the most interesting aspect of the project?
“Well, we are almost fully contracted for the original 40,000 barrel per day and we have determined that with very little additional capital investment we expect to be able to expand the facility to 80,000 barrels a day.”
With the Commercial Operation Date six months away on April 1, 2019, can you go over the economic rationale for RIPET?
“When producers sell their propane at Edmonton, the market pricing is the same as at the Conway propane storage and terminaling Hub (which is the closest Hub to Alberta for propane). Because of the large increase in propane production in the US, the spread from Conway to Mnt Belvieu is trading lower from about an average of 5 cents to a 10 – 30 cents US per gallon discount. This is important because Mount Belvieu is the driver for Asian prices now.
The propane price in Japan equals Mnt Belvieu plus terminaling costs at the US Gulf coast plus the ocean freight to get it to Asia. The RIPET export terminal has advantages. Low net rail cost to the BC coast for suppliers. Plus, the shipping time from Prince Rupert to Japan is nine or 10 days instead of 20 – so ocean freight costs are about half of what it is from the US Gulf Coast. “
Can you explain the significance of the Astomos agreement to purchase 50 percent of the 1.2 million tonnes of propane shipped from the Terminal each year, beginning in Q1 2019?
“Astomos has the largest fleet of Propane VLGC carriers in the world and at a high level, all of the propane from RIPET at Prince Rupert will almost always go to Japan. The reason is the Japanese buy propane from the US Gulf Coast, from the Middle East, they will buy it from other supply points that aren’t as well developed but all of those supply points wouldn’t necessarily go through south east asia, they would go past China and past Korea to get up to Japan. So, Japan will always do a physical arbitrage with the supply they are buying from other places. They’ll just bring in the propane that is available from Prince Rupert and drop off the propane they are bringing in from other regions at markets that are closer.
So our propane will always go to Japan and having a Japanese offtaker makes the most sense. Japan’s Propane prices are preferred as the price is set by an index recognized as being the market clearing price, the Argus Far East index, which is delivered prices at terminals at different points in Japan and largely in Korea. So that Far East Index is made up of transactions that take place so we know that we’re getting the same price as the deals done in the region. So for our producers and Altagas’s own supply, we will be selling at the same Japan/Korea price , less the ocean freight to get it there from Prince Rupert.”
What are the three biggest takeaways from your update today?
“First, not only is Prince Rupert the closest North American terminal to Japan and other Asian markets and it’s also the closest propane terminal to Sydney Australia.
Secondly, in Western Canada, we lack egress for our commodities. What RIPET represents is the first of several commodities that can be either produced or manufactured in Western Canada and exported to Asia.
Lastly, other companies have tried to develop export projects for other commodities. Altagas, because of their stakeholder relationships, presence in British Columbia and experience there, was able to take an idea , move it through the necessary regulatory processes and then actually build it on time and on budget. We were able to recognize the opportunity, put a plan in place and deliver on the execution.”
In conversation, Fisher also discussed the advantages in using a site in Prince Rupert that was previously an industrial site. It had existing CN railway access and a world class marine jetty with deep water access to the Pacific Ocean.
The project team is also collaborating closely with First Nations and communities to create sustainable social value so that RIPET will provide long term community benefits along with employment and contracting opportunities during both construction and operations phases.
Maureen McCall is a EnergyNow contributor and freelance writer that has over 14 years experience in the oil and gas industry from operations to land and joint ventures
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