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Spending C$2.1 billion on oil sands pipe
Calgary-based Inter Pipeline Fund is moving ahead with a C$2.1 billion expansion of its oil sands pipeline systems in northern Alberta after negotiating binding shipping agreements with the production joint venture of Cenovus Energy and ConocoPhillips Canada to transport bitumen blend and diluents.
The shipping agreement with FCCL Partnership is committed to 820,000 barrels per day of delivery capacity by constructing 522 miles of new pipeline and seven new pump stations.
The deal involves three thermal-recovery projects at Foster Creek, Christina Lake and Narrows Lake and is targeting completion of the additional capacity on Inter’s Cold Lake and Polaris systems between mid-2014 and mid-2016.
Inter Chief Executive Officer David Fesyk said in a statement the expansion of his company’s oil sands transportation business will “create a strong, integrated network of large diameter pipelines capable of providing our regional oil sands customers with both bitumen blend and diluent service.”
Cash up front Under a shipper support agreement, FCCL has agreed to provide C$225 million of cash funding commitments to cover the purchase of long lead-time materials, engineering costs, land procurement and regulatory activities.
In the event the transportation agreements are not executed Inter Pipeline will be reimbursed for C$225 million of incurred expenditures.
Total pumping capacity on the Cold Lake pipeline system will be increased by about 310,000 bpd, while 20-inch and 30-inch diameter pipelines from Narrows Lake will each have initial capacity of 190,000 bpd, with the option to expand the 30-inch line to 600,000 bpd.
Construction of a 145-mile, 42-inch pipeline from La Corey to Hardisty in central Alberta will add 540,000 bpd of mainline capacity, of which 500,000 bpd is expected to be committed to FCCL.
On the Polaris diluents system, wholly owned by Inter Pipeline, planned capacity will be raised to 820,000 bpd from 120,000 bpd at an estimated capital cost of C$1 billion.
—Gary Park
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