History of The Petroleum Industry in Canada (natural Gas Liquids)

History Of The Petroleum Industry In Canada (natural Gas Liquids)

Canada's natural gas liquids industry dates back to the discovery of wet natural gas at Turner Valley, Alberta in 1914. The gas was less important than the natural gasoline - "skunk gas" it was called, because of its distinctive odour - that early producers extracted from it. That natural gas liquid could be poured directly into an automobile's fuel tank.

As the natural gas industry grew with pipeline construction in the 1950s, many companies - Imperial, British American (B/A; later Gulf Canada) and Shell, for example - constructed plants in Alberta to process newly discovered natural gas so it could be made pipeline-ready. Many of these plants extracted NGLs from natural gas as part of natural gas processing.

For NGLs to become a major business, however, took the efforts of large and imaginative players, plus the development of a much larger gas supply from which to extract these light hydrocarbons. Conditions were right in the 1960s, and the two companies that took advantage of the opportunity were Amoco Corporation and Dome Petroleum, neither of which is any longer in existence. Amoco took over Dome after the company essentially went bankrupt in 1988, and BP took over Amoco in a friendly merger ten years later. Here is the story of how those two companies developed key components of the infrastructure for this vital niche industry.

Headquarters for Amoco Corporation were in Chicago, because that city is close to Whiting, Indiana. Whiting was home of Amoco’s largest oil refinery (and one of the largest in the world). In operation since 1890, Whiting originally refined sour crude oil from the neighbouring state of Ohio. And it was Standard of Indiana’s (Amoco’s) most important single asset after the US Supreme Court ordered the Standard Oil Trust broken up. In its early years, Amoco was primarily a refiner and a marketer of refined products to expanding Midwestern markets. Whiting provided products that could be marketed from Chicago — a city that was itself a large market for petroleum products.

By 1970, Amoco had become one of the largest integrated oil corporations in the world through both acquisitions and internal growth. Besides being a large-scale refiner and distributor of refined products, it was a powerful force in petrochemicals, oil and gas exploration and production, pipelines, and in the marketing of crude oil, natural gas and natural gas liquids (NGLs).

The corporation was growing globally, but it was heavily focused in North America. And though its oil and gas activity was concentrated in the US southwest and in western Canada, its marketing presence was strongest in middle America. From its Chicago base, the corporation had unrivalled intelligence about hydrocarbon demand in the US Midwest.