Edmonton builds oil storage

Keyera and Kinder Morgan, two midstream companies, have joined forces to build 4.8 million barrels of new storage in the Edmonton marketing hub.

They will spend a combined C$672 million on the terminal, while Kinder Morgan will an additional C$69 million on connecting pipelines and infrastructure.

The facility will be designed to increase capacity to 6.8 million barrels, depending on future demand. The initial volumes are underpinned by a number of take-or-pay contracts.

The joint venture will involve building 12 crude storage tanks on 80 acres owned by Keyera, with commissioning of the first tanks scheduled for the second half of 2017. Kinder Morgan will oversee operation of the facility.

Keyera Chief Executive Officer David Smith said there has been a clear growth in demand for crude storage as production volumes have grown in Western Canada and the availability of land for terminals has become “pretty tight” in the Edmonton area.

Kinder Morgan executive John Schlosser said completion of the project will have seen his company build its merchant storage from zero to 12 million barrels in 10 years, playing a significant role in the creation of Edmonton as a North American crude oil hub.

Smith said there is 7.2 million barrels of merchant storage available for leasing to customers in Edmonton and 8.3 million barrels of regulated storage owned by pipeline companies Kinder Morgan and Enbridge.

Energy intelligence firm Genscape reported inventories in Edmonton were at about 64 percent of capacity in late March.

Customers for the new terminal will be able to move products from the new terminal to markets in the United States and Eastern Canada in various ways, including pipelines and rail.

Output from the oil sands, regardless of the current market saturation, is still expected to grow to 6.4 million bpd by 2030 from 3.5 million bpd in 2014, according to the Canadian Association of Petroleum Producers.

- Gary Park