Keyera-Plains part ways on pipeline

Keyera and Plains Midstream Canada have abandoned their plans for a joint-venture pipeline, keeping tight-lipped about the reasons, but prompting intense speculation in the process.

The two companies said they have parted ways to separately pursue alternatives to their C$1 billion Western Reach project to transport natural gas liquids and condensate from the Deep Basin of northwestern Alberta to the Edmonton-area trading hub at Fort Saskatchewan.

Keyera said it was making fresh efforts to secure producer commitments to underpin construction.

Plains said its Canadian unit “continues to evaluate opportunities” to participate in the expected growth of NGL volumes in Alberta’s resource gas plays.

The company has been offside with the Alberta Energy Regulator (formerly the Alberta Energy Resources Conservation Board) which last month ordered an audit of all Plains’ Alberta operations and issued an indefinite ruling that all future operations by the company would have to be approved at the highest level and only after intense scrutiny.

The AER had issued 19 high- and low-risk deficiency and non-compliance notices against Plains over the period from January 2011 to July 2013.

The company experienced three major leaks from different pipelines in different regions of the province.

Robert Catellier, energy infrastructure research director for Macquarie Securities, said the tie between Keyera and Plains was “of diminished value since the AER’s recent order rendered every Plains application a non-routine matter.”

He said the onus is now on Keyera to convince producers that changes to the Western Reach project enhance its ability to compete with a rival project by Pembina Pipeline.

“We believe that sentiment with respect to the project may improve as moving forward without Plains removes uncertainty in the market with respect to Western Reach’s ability to progress given recent regulatory actions,” said Robert Kwan, an analyst with RBC Dominion Securities.

—Gary Park