Husky not ready to convert or sell pipelines

Gary Park

Husky Energy is cooling off speculation that it might sell or convert into an income trust its 1,200 miles of pipeline in northern Alberta.

For the last four months it has been weighing the prospect of an initial public offering or sale of up midstream assets, including the pipelines.

But President and Chief Executive Officer John Lau told a conference call Oct. 21 that the pipelines, which have a book value of about C$250 million and a “substantially” higher market value, will not be part of a financial restructuring in the near term. He said there would not be an immediate move because Husky is moving ahead with two oil sands projects.

Its C$500 million Tucker project near Cold Lake is scheduled to start operations no later than early 2007 and peak at 30,000 barrels per day, while applications have been filed for the Sunrise project, a possible C$2.5 billion venture that could come on stream at 50,000 bpd in 2008 and quadruple in size over the 2010-2014 period.

The pipeline assets could take a key role in this oil sands expansion, including connections to Husky’s Lloydminster upgrader and its heavy and synthetic oil terminal at Hardisty, Alberta.

“At the moment we are looking at opportunities, looking at timing, so that is not one of the projects that we want to sell in the near term,” Lau said.