Joint venture moves ahead with $1.35B B.C. LPG export facility

Key Takeaways:

• The team is expecting a projected gross joint venture capital cost of $1.35 billion, excluding governmental incentives and support.
• The bulk of REEF’s construction activities are planned to take place over 2025 and 2026 with select workstreams beginning in 2024.
• 90% of equipment, packaging and pipes expected to be prefabricated offsite in controlled operating environments.

The Whole Story:

A joint venture comprised of AltaGas Ltd. and Royal Vopak has announced a positive final investment decision (FID) on the Ridley Island Energy Export Facility (REEF), a large-scale liquefied petroleum gas (LPG) and bulk liquids terminal with rail, logistics and marine infrastructure on Ridley Island in B.C. Following a five-year environmental preparation and review process, extensive engagement with multiple stakeholders including Indigenous rights holders and local communities, the joint venture is set to deliver the export facility. 

“This positive FID enables AltaGas to continue connecting Canadian energy to Asian markets and drive valuable outcomes for all our customers,” said Vern Yu, president and CEO of AltaGas. “Canada has a structural advantage in delivering LPGs to Asia with the shortest shipping time and lowest maritime emissions footprint. AltaGas delivers more than 19 percent of Japan’s propane and 13 percent of South Korea’s LPG imports, connecting our upstream customers with customers in Asia. We look forward to working with our partners to drive more long-term value creation with REEF.”

The joint venture stated that it has completed all major gating items, including front-end engineering design (FEED) and a detailed Class III capital estimate. Site clearing work is more than 95% complete and with required permits in hand, the project is expected to come online near the end of 2026.

The team is expecting a projected gross joint venture capital cost of $1.35 billion, excluding governmental incentives and support.

The team added that onsite work will be minimized to reduce capital cost risk and community impacts, with 90% of equipment, packaging and pipes expected to be prefabricated offsite in controlled operating environments.

The team believes the facility will enhance Canada’s role as a growing global energy exporter, strengthen Canadian and Asia Pacific energy connectivity and provide Canadian producers and aggregators with access to the premium global markets for LPGs.

The joint venture expects to lock-in more than 60% of the phase 1 capital costs through fixed-price, lump-sum engineering, procurement and fabrication contracts prior to construction.

Vopak and AltaGas anticipate funding their 50% pro-rata ownership through each company’s respective financial capacity with no leverage at the Partnership level.

The capital cost breakdown of phase 1 includes approximately $875 million for construction of the facility, balance of the plant and LPG storage tanks and $475 million for construction of the new dedicated jetty and extensive rail and logistics infrastructure. The infrastructure includes additional redundancies to provide operational flexibility that benefits the Joint Venture and customers over the long term.

The bulk of REEF’s construction activities are planned to take place over 2025 and 2026 with select workstreams beginning in 2024.

The team noted that with only ten shipping days to the fastest growing demand markets in Northeast Asia, REEF has a structural advantage in delivering LPGs to Asia with the shortest shipping time globally.

The project has First Nations support agreements in place and will drive further economic benefits to local communities in Northwestern B.C. through construction activities, long-term job creation and community investment focused on delivering positive outcomes for all stakeholders.

REEF will be constructed and operate under AltaGas and Vopak’s existing exclusive rights granted by the Prince Rupert Port Authority (PRPA) to develop LPG, methanol and other bulk liquids exports on Ridley Island.

“We are excited to be able to execute on our growth strategy and invest in export infrastructure on this highly strategic location” said Dick Richelle, chairman of the executive board and CEO of Royal Vopak. “Prince Rupert, with the shortest shipping distances between North America and Asia, gives the opportunity to drive progress by increasing the trade between Canada and the Asia Pacific region. We are proud to contribute to this development and are thankful for the good collaboration with our partner AltaGas and other key stakeholders. The trust and support of local First Nations and communities makes this envisioned terminal a reality.”