When Dow, one of the world’s largest chemical producers, plans to commit billions to build a state-of-the-art new complex, it has a comprehensive checklist of factors to consider and a list of suitors around the globe competing for the investment.

In 2023, after a lengthy review, Dow Canada president Diego Ordonez says Alberta made the most sense as the location for a new US$6.5-billion net-zero scope 1 and 2 emissions petrochemical complex.

The plant, to start operations in 2027, will produce polyethylene, the most widely used plastic.

“Even without a coastline, Alberta is in a great spot. There is a real demand for its energy as feedstock to manufacture the chemicals the world needs to continue to prosper,” says Ordonez, a self-described “renegade accountant” who has spent 35 years with Dow across the globe.

“We have operations around the world, so you have a list of possible locations when you are looking at the conditions that are necessary for this type of facility. You need a reliable supply of the raw material ethane, which you obtain through natural gas, and it has to be cost-competitive today and in the foreseeable future.”

The project also needs a site with a proven safety and reliability track record, he says.

Alberta’s Industrial Heartland region, near Edmonton, ticked all those boxes – including proximity to the right geology and infrastructure for carbon capture and storage (CCS), he says.

Reducing emissions with carbon capture and storage

A “significant factor” that supported Dow´s decision to invest in Canada was the financial support committed by the Alberta and federal governments through Alberta’s Petrochemicals Incentive Program and Canada’s CCS Investment Tax Credit, Ordonez says.

Dow’s project will feature Canada’s largest “blue” hydrogen production facility, under a more than $2 billion contract signed in August with Linde Canada. “Blue” hydrogen is the term for hydrogen generated from natural gas with operations that include CCS to reduce emissions.

Linde’s facility will be built to capture more than two million tonnes of carbon dioxide per year, or the annual equivalent of taking about 475,000 gasoline-powered vehicles off the road.

World plastics demand to triple by 2060

Reducing emissions from petrochemical projects is important as demand for plastics continues to grow.

“Petrochemicals are the building blocks of modern society. Clothing, tires, digital devices, packaging, detergents, healthcare and countless other everyday items that enable modern life are made from petrochemicals,” says a new report from Wood Mackenzie, a global consultancy specializing in analyzing energy data.

“With growing global populations and rising income levels, demand for petrochemicals is projected to increase.”

The Global Plastics Outlook, published by the Paris-based Organisation for Economic Co-operation and Development, forecasts the use of plastics globally will nearly triple by 2060, driven by economic and population growth.

New ethane supply

The announcement of more petrochemical production in Alberta is supported by increasing ethane supply.

Pipeline operator Wolf Midstream announced in July it will invest $1 billion to expand the capacity of its northeast Alberta Natural Gas Liquids system, bringing up to 60,000 barrels per day of ethane needed that will help meet growing petrochemical demand.

“What we are seeing with these large-scale investment decisions is companies are comfortable with the value proposition in Alberta. We have created or are creating economies of scale,” says Mark Plamondon, executive director of Alberta’s Industrial Heartland Association.

“We have the lowest cost feedstocks in North America and are competitive in the world on price. But we also have appeal with our carbon capture and sequestration infrastructure so companies can achieve both economic and environmental objectives. It is a one-two punch that is a game changer for us.”

Policy matters

But policy matters as much as steel in the ground, something Ordonez sees as differentiating Canada from other jurisdictions with clusters of heavy industries.

“Canada has market-based carbon pricing at both the federal and provincial level. That was an essential piece for us to decide to invest,” he says. “There is nothing similar in place in the USA or the Middle East.”

And work by industry has also resulted in government and regulatory support to support new investments in petrochemicals.

“For these investments to take place, you need a good active collaboration between industry and government. We have seen that in Alberta, and it has resulted in significant investments for Alberta,” says Greg Moffatt, executive vice-president of the Chemistry Industry Association of Canada.

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