Williams Signs New Agreement to Provide Gas Processing in Canada's Oil Sands
Long-term Agreement Expected to Add Nearly 15,000 Barrels Per Day of NGL/Olefins Production
Project Builds on Company's Growing Scale, Expertise in Canada's Oil Sands Gas Processing
New Operations to Further Reduce Upgrader Emissions
Expect Project Funding from Canadian Cash Flows, International Cash On-hand
Under the new long-term agreement, Williams will extract, transport, fractionate, own and market the natural gas liquids (NGLs) and olefins recovered from the offgas at the oil sands producer's upgrader near Fort McMurray, Alberta. Under the agreement, the NGL/olefins recovered are expected to be approximately 12,000 barrels per day (bpd) by mid-2015 and growing to approximately 15,000 bpd by 2018.
The NGL/olefins mixture will be fractionated at Williams' Redwater facilities into an ethane/ethylene mix, propane, polymer grade propylene, normal butane, an alkylation feed and condensate. The ethane price risk associated with this deal is mitigated via the previously announced long-term agreement to supply NOVA Chemicals Corporation with up to 17,000 bpd of ethane and ethylene.
The propane recovered will be sold into the local propane market and would potentially be used as feedstock at Williams' proposed propane dehydrogenation (PDH) facility in Canada. The other products will be sold into the established markets where Williams sells existing NGLs and olefins produced in Canada.
"This new agreement will build on the unique expertise and large-scale infrastructure we've built in Canada," said David Chappell, president of Williams Energy Canada. "The scale that we are building here - with fractionation, distribution and storage - gives us the ability to generate significant long-term incremental value from our operations.
"The new operations will also further reduce greenhouse gas and sulphur dioxide emissions from the upgraders' oil sands operations, and produce valuable commodities that were previously being burned," Chappell said.
The offgas processing that Williams pioneered significantly reduces emissions at its customers' oil sands production facilities. Williams captures and processes a rich NGL/olefins mixture that would normally be burned by the oil sands producer. The producer instead burns methane that Williams provides in exchange for the NGL/olefins mixture.
Once full operating capacity is achieved at the producer's location, processing the offgas is expected to reduce emissions of carbon dioxide (CO2) - a greenhouse gas - by an average of approximately 200,000 tonnes per year. It is expected to reduce emissions of sulphur dioxide (SO2) - a contributor to acid rain - by an average of approximately 2,000 tonnes per year.
When combined with Williams' existing offgas processing at another third-party oil sands producer, the company's operations in Canada will eventually reduce annual CO2 emissions by more than 500,000 tonnes and annual SO2 emissions by 4,500 tonnes.
New Facilities and Capital Expenditure Guidance
To support the new agreement, Williams plans to build a new liquids extraction plant and supporting facilities at the oil sands producer's upgrader. It also plans to build an extension of its Boreal Pipeline that will enable transportation of the NGL/olefins mixture to its expanded Redwater facility outside of Edmonton.
The total capital expenditures expected for the project is CA$500 million to CA$600 million. The 2012-14 portions of the capital expenditures are included in Williams' latest capital expenditure guidance, which was issued on Aug. 1.
Williams expects to fund the construction using cash flows from its Canadian operations as well as with international cash on-hand.
About Williams (NYSE: WMB)
Williams is one of the leading energy infrastructure companies in North America. It owns interests in or operates 15,000 miles of interstate gas pipelines, 1,000 miles of NGL transportation pipelines, and more than 10,000 miles of oil and gas gathering pipelines. The company's facilities have daily gas processing capacity of 6.6 billion cubic feet of natural gas and NGL production of more than 200,000 barrels per day. Williams owns approximately 66-percent of Williams Partners L.P. (NYS: WPZ) , one of the largest diversified energy master limited partnerships. Williams Partners owns most of Williams' interstate gas pipeline and domestic midstream assets. The company's headquarters is in Tulsa, Okla.
Portions of this document may constitute "forward-looking statements" as defined by federal law. Although the company believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Any such statements are made in reliance on the "safe harbor" protections provided under the Private Securities Reform Act of 1995. Additional information about issues that could lead to material changes in performance is contained in the company's annual reports filed with the Securities and Exchange Commission.
Jeff Pounds, 918-573-3332
John Porter, 918-573-0797
Sharna Reingold, 918-573-2078
KEYWORDS: United States North America Canada Oklahoma
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