Pembina Pipeline Corporation has announced that it is moving forward with the Heartland Extraction Plant (HEP) project while also providing an update on its long-term ethane supply agreement with Dow.
The sanctioning of HEP is described as a capital-efficient and low-risk opportunity to monetise Pembina’s liquids extraction rights on the Yellowhead Pipeline, while also creating future growth potential. Through a series of new and amended agreements, Pembina and Dow have increased the overall ethane supply commitment and aligned volume delivery timelines with Dow’s revised Path2Zero project schedule. The revised agreements are also expected to strengthen the commercial economics of the HEP development.
The Heartland Extraction Plant will be a new 750 million cubic feet per day straddle plant designed to extract natural gas liquids (NGLs) under Pembina’s extraction rights on the Yellowhead Pipeline. The project represents an expanded version of the previously proposed Yellowhead Extraction Plant and includes additional capacity to support future opportunities within Alberta’s Industrial Heartland region.
Under a new long-term agreement, Pembina will begin supplying Dow with ethane from HEP in late 2029, with volumes expected to ramp up to 22,500 barrels per day by the end of 2030. Following extraction at HEP, the ethane-plus mix will be processed through a combination of Dow’s Fort Saskatchewan facility and Pembina’s Redwater Complex.
Pembina will retain the associated propane-plus production from the project and is expected to benefit from downstream fractionation and marketing opportunities tied to up to 9,500 barrels per day of propane-plus NGL production.
The HEP project carries an estimated capital cost of approximately $570 million and is expected to enter service in late 2029. Project EBITDA is anticipated to include both fixed-fee revenue and exposure to frac spreads, with the EBITDA build multiple projected to range between five and seven times based on long-term historical pricing averages.
Pembina also confirmed amendments to its previously announced ethane supply agreement with Dow. Under the revised long-term arrangement, Pembina will supply Dow with 35,000 barrels per day of ethane beginning with the startup of Dow’s Path2Zero project, which is expected to come online in 2029. The company plans to source the ethane volumes through its existing integrated infrastructure network, including gas processing plants, transportation assets and fractionation facilities.
Combined with the new HEP-related agreement, Pembina’s total ethane supply commitment to Dow will rise to 57,500 barrels per day, representing a 15 percent increase from the originally agreed 50,000 barrels per day.
Scott Burrows, president and chief executive officer of Pembina, said the agreement demonstrates the company’s ability to develop mutually beneficial solutions with customers while advancing its strategy for capital-efficient growth and strengthening its NGL business in Western Canada.
For more information visit www.pembina.com
