Canada's NOVA Chemicals Gears Up for $850 Million in 2015 Capital Spending

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Researched by Industrial Info Resources (Sugar Land, Texas)--NOVA Chemicals (Calgary, Alberta) plans to make 2015 the second-largest year for capital expenditures (capex) in the company's history, with more than 40% of the amount going to the $900 million Polyethylene 1 (PE1) expansion at NOVA's Joffre site in Alberta.

Industrial Info is tracking eight active NOVA projects through 2018 worth $1.53 billion, including the Joffre expansion.

Todd Karran, the company's acting chief executive officer and chief financial officer, said during NOVA's recent third-quarter earnings conference call that the company's planned capex for 2015 will total $850 million, compared with $700 million for 2014.

Karran said $350 million to $370 million will be spent next year on the Joffre project, which would be completed in third-quarter 2016. The Joffre expansion is part of the NOVA 2020 strategic growth program.

Ledcor Group (Vancouver, Canada) is the project's general contractor. The 40% capacity expansion includes a new reactor that will be able to produce at least 950 million pounds per year of linear low-density polyethylene (LLDPE).

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About $200 million will be spent next year on sustaining capital, Karran said, adding that the rest will be spent on ethane furnaces and other expansions.

"Beyond our NOVA 2020 plan, we are beginning to look at future options for our western assets, which could include items such as an approximate 25% debottleneck of our E2 asset [at Joffre]," Karran said in the conference call. The E2 unit has a production capacity of 1.8 billion pounds per year of ethylene.

In eastern Canada, NOVA has completed a project to convert its Corunna cracker in Ontario to allow it to utilize up to 100% natural gas liquids as feedstock, Karran said. The cracker, which is taking ethane from the Marcellus Shale, no longer depends on crude-oil-based naphtha as its feedstock.

"While we have retained the flexibility to use heavier feedstock when market conditions are favorable, we expect our use of heavy feedstock to be minimal, if at all, and have taken steps to de-inventory and shut down our crude unit," Karran said. "We expect a final shutdown decision will be made in the first half of 2015."

For additional information, see August 13, 2013, article - NOVA Chemical's Corunna, Canada Ethylene Unit Nearly Completes Switch to All-NGLs Feedstock, Exploits Marcellus Shale.

Much of NOVA's strategy hinges on natural gas liquids from U.S. shales. In October, NOVA said it reached a long-term agreement with Kinder Morgan (NYSE:KMI) (Houston, Texas) to move ethane and ethane-propane mix to Ontario from the Utica Shale via Kinder Morgan's $500 million UTOPIA pipeline project.

Kinder Morgan plans to build a 240-mile, 12-inch diameter pipeline from Harrison County, Ohio, to Kinder Morgan's Cochin Pipeline near Riga, Michigan, where the company would then move product east to Ontario. The UTOPIA project would have an initial 50,000-barrel-per-day (BBL/d) capacity, which is expandable to more than 75,000 BBL/d, Kinder Morgan said. The project is expected to be in service by early 2018.

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"Securing this pipeline capacity and gaining access to additional feedstock sources opens doors to explore a potential full ethane conversion at Corunna, in addition to exploring the previously announced cracker expansion and potential polyethylene projects," Karran said.

NOVA is working with WorleyParsons (North Sydney, Australia) on detailed design for expansion of the Corruna ethylene unit. The $400 million project would expand production at the 2.1 billion-pound-per-year unit by 20%. Kick off is slated for the first quarter of 2017, with completion in first-quarter 2018.

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NOVA, which is owned by International Petroleum Investment Company (Abu Dhabi), reported its third-quarter profit more than doubled to $259 million from the year-earlier quarter, as a result of higher margins in all of its business segments. Revenue rose to $1.43 billion from $1.26 billion.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.