The Canadian Industry

Figure 1 - Canadian Propane Supply and Disposition - 2006 Estimates

Notes:
Green blocks show production
White blocks show regional propane demand
Orange blocks show United States regions that receive Canadian exports of propane
Red block shows imports into Canada
PADD: Petroleum Administration for Defense District that defines a market area in the U.S.
Source: NEB

Since NGLs are mostly extracted from natural gas, natural gas producing regions are also NGL producing regions. (See section on How Canadian Natural Gas Markets Work.) Natural gas production from conventional supplies is expected to remain flat, so NGL production is also expected to remain flat. Growing natural gas production from coal contains no liquids, while potential natural gas supplies from the north have relatively low liquids content.

Western Canada accounts for the majority of NGL supply, but there is some production at the Point Tupper, Nova Scotia facility, which processes natural gas from Sable Island. Natural gas liquids are initially extracted from natural gas at field plants. There are almost 700 active plants in Canada and over 600 are located in Alberta. The other provinces with field plants are British Columbia, Saskatchewan and Nova Scotia. In Western Canada, nine facilities called straddle plants extract incremental amounts of ethane and propane from natural gas. They are located on the major gas pipeline systems. The initial products from all plants are usually NGL mixes. These mixes are usually sent to fractionation plants to be separated into individual products such as ethane, propane and butane. In 2006, estimated NGL production from all plants, excluding pentanes plus, was 98 542 m³/d (621 Mb/d).

Once extracted, NGLs are usually transported from Alberta to Sarnia, Ontario and to the U.S. via three major pipelines: Cochin, Enbridge and Alliance. Cochin transports individual products such as ethane, propane and butane, while Enbridge is mainly an oil pipeline, but also transports an NGL mix. In the high pressure Alliance natural gas pipeline, NGLs are transported in the natural gas and are extracted at the end of the pipeline near Chicago, Illinois.

Ethane

Nearly all of the ethane produced in Canada is extracted at plants located in Alberta, and in 2006, this amounted to an estimated 41 971 m³/d (264 Mb/d). Most of this is used in Canada as a feedstock for the petrochemical industry to make ethylene, an important building block in the manufacture of chemicals, particularly plastics. The majority of Canada's petrochemical industry is located in Alberta and is ethane-based, while the rest of the industry is located in Ontario. With the increase in ethylene demand and expected flat natural gas production, Alberta ethane supply is currently considered fully used. A small amount of ethane in Canada is also used as a solvent to improve oil recovery from mature producing fields. The last export of ethane from Canada was January 2001.

Propane

In 2006, propane extracted from natural gas was estimated at 30 254 m³/d (190 Mb/d), while refineries produced 3 422 m³/d (22 Mb/d) of propane. Total propane demand was 34 222 m³/d (215 Mb/d), of which 57 percent of this was exported to the U.S.

Figure 2 - Canadian Propane Demand - 2008 Estimates

Sources: Statistics Canada and NEB

Figure 2 shows Canadian demand for propane. Residential and commercial sectors use propane for space heating, water heating and cooking. Of the 12 million households in Canada, propane is used by about 93,000 households, or about one percent. These residences are typically located in areas beyond the natural gas distribution systems. An average household that requires about 100 gigajoules of energy to heat their home will use about 3 900 litres of propane.

Aside from space heating, industrial uses for propane include fuel for furnaces, heat treating of metals, and heating for ovens, kilns and dryers. Propane has the largest share of the auto fuel market after gasoline and diesel, but its use in Canada and the U.S. has been falling because of the cost of conversion, requirement for large storage tanks, fewer refueling stations than for gasoline and the restriction against propane vehicles in underground parking. Propane's use as a petrochemical feedstock is growing in Canada in light of the tight ethane supply situation. Propane used in agriculture is mainly for crop drying.

Butane

In 2006, butane extracted from natural gas was estimated at 15 621 m³/d (98 Mb/d) or 68 percent of total production. About 7 427 m³/d (47 Mb/d) of butane came from refineries. Although there is butane currently available for export, domestic demand is expected to grow. For example, butane is also being used as a blending agent to dilute heavy oil for transportation through pipelines. This is because of the limited supply of the primary blending agent, pentanes plus. Butane is also used in the production of alkylate, an octane enhancer for gasoline. Butane is also used in Alberta to produce vinyl acetate, a chemical commonly used in water-based paints and adhesives, in safety glass interlayers and in hairspray.