U.S. pipeline backs oil sands outlook

Gary Park

Petroleum News Calgary correspondent

California-based Pacific Energy Partners has issued a strong endorsement of Alberta’s oil sands future by acquiring one Alberta pipeline system and setting itself up to buy a second. If the deals announced Feb. 24 go through, Pacific Energy will be able to offer an integrated connection from Edmonton to the PADD IV Rocky Mountain refineries that it currently serves.

It will pay C$156 million for BP Canada’s 800-mile Rangeland system, including an 85,000 barrel-per-day trunk line from southern Alberta to the U.S. border at Montana. A letter of intent has been signed with Imperial Oil to acquire the 138-mile Mid Alberta pipeline that feeds 50,000 bpd into the Rangeland system.

From the U.S.-Canada border, Pacific Energy operates its Western Corridor System through Montana to Guernsey, Wyo., with refineries in both states.

It roughly parallels the route of the Terasen-owned Express Pipeline from Hardisty, in central Alberta, to Casper, Wyo., where it feeds into Terasen’s Platte pipeline to the Wood River, Ill., refining region. Express, which has struggled over the years to fill its 172,000 bpd capacity, is now in such heavy demand that Terasen has accelerated plans to boost volumes to 280,000 bpd by April 2005.

Pacific Energy President and Chief Executive Officer Irv Toole said the Alberta pipelines are part of the partnership’s regional development plans in the Rocky Mountains and set up a “unique and strategic opportunity” to take advantage of the expected surge on Alberta’s synthetic crude production.

The partnership said “supplies of synthetic crude production, blends derived from synthetic crude oil and displaced conventional Canadian crude oil are increasing as a result of the on-going expansion of oil sands processing in northern Alberta.”

It said the potential reserves of 175 billion barrels in the oil sands are important to Rocky Mountain refineries as production in that region is declining and new supplies are needed to meet a rising demand for refined products.