Canada-based energy infrastructure firm AltaGas and pipeline operator Keyera entered into long-term agreements for processing liquefied petroleum gases (LPGs) on Friday.
Keyera entered a 15-year tolling contract at AltaGas’ Ridley Island Energy Export Facility for 12,500 barrels per day (bpd) of LPG export capacity.
In turn, AltaGas signed an 18-year agreement for 8,000 bpd of fractionation capacity at Keyera’s natural gas liquids (NGLs) processing and storage facility in Saskatchewan.
U.S. President Donald Trump imposed and later suspended tariffs on Canadian goods, including a 10% levy on energy imports.
As a result, Canadian companies are looking to reduce dependence on the U.S. by looking towards other markets such as those in Asia.
AltaGas’ Ridley export facility is expected to be operational by the end of 2026, with the company saying that it requires only ten shipping days to export to the LPG markets in Northeast Asia.
The 18-year fractionation contract, which includes processing of NGLs to be produced at AltaGas’ Pipestone II plant in Alberta, will provide long-term capacity for AltaGas’ production in Montney shale.
“These agreements strengthen the long-term growth and predictability of cash flows for both companies and strengthens Canada’s link into key Asian markets,” said Vern Yu, President and CEO of AltaGas.
Tolling is a service contract where one company agrees to pay a fee or toll to another to process raw materials into finished product.
Fractionation is used to seperate raw natural gas into individual substances such as methane, ethane, propane, butane and natural gasoline.
“We see the announcement as slightly positive for both companies’ share prices, with the arrangements allowing each party to lever off the other’s infrastructure, and underpin their respective growth projects with long-term contracts for the projects’ capacities,” RBC Capital Markets analyst Maurice Choy said.
(Reporting by Pooja Menon in Bengaluru; Editing by Sahal Muhammed)