Pembina Pipeline and Kuwait Petroleum's subsidiary Petrochemical Industries Company (PIC) have established a joint venture to go ahead with their proposed integrated propylene and polypropylene production facility in Canada.

The companies have signed 50/50 joint venture agreements that includes binding commercial terms to support the project. A new entity, Canada Kuwait Petrochemical Corporation (CKPC), has been established to proceed with activities for front end engineering design (FEED) for the project. 

Pembina NGL & Natural Gas Facilities senior vice president Stuart Taylor said: "The encouraging results of the recently completed feasibility study, the previously announced award of $300m in royalty credits from the Alberta Government's Petrochemicals Diversification Program, and a Joint Venture with our world class partner, PIC, gives Pembina the confidence to further advance the Project.

"This Project represents a material extension of our natural gas liquids value chain strategy and creates a significant incremental local market for western Canadian hydrocarbons."

The PDH/PP facility is expected to cost in between $3.8bn to $4.2bn as per initial estimates. It is likely to consume 22,000 barrels per day of propane that is possibly sourced from Pembina's Redwater Fractionation Complex (RFS) and also other local facilities.

The annual production of the new facility is estimated to be in excess of 1.2 billion pounds of polypropylene for the North American and global markets.

According to Pembina, FEED’s deliverables include a refined capital cost estimate, an execution plan for the project, an updated construction schedule and projected in-service date, regulatory applications and other items.

The FEED is likely to cost the partners around 2-2.5% of the project's current cost estimate. Its activities are targeted to be completed in the latter half of 2018, after which a final investment decision (FID) for each partner will be determined.

PIC Olefins and Aromatics deputy chief executive officer Hosnia Hashim said: "Establishing a Joint Venture with Pembina and investing in a large-scale value-addition project will contribute to PIC's continued pursuit of sustainable and globally-diversified petrochemical growth.

“This Joint Venture between PIC and Pembina will be positioned to flourish in a competitive market with access to secure and advantaged feedstock. PIC welcomes the support of the local governments in this initiative and is looking forward to potentially expanding its asset base within Alberta."

Earlier in the month, Pembina Pipeline announced its agreement to acquire rival Veresen for $7.1bn to potentially create an energy infrastructure giant in Canada.