Pembina to proceed with $2B Phase III pipeline expansion

Long-term agreements underpin new major expansions.

CALGARY – Pembina Pipeline Corp. has reached binding commercial agreements to proceed with constructing approximately $2 billion in pipeline expansions, which is underpinned by long-term take-or-pay transportation services agreements with 30 customers in Pembina’s operating areas and is expected to be in service between late 2016 and mid 2017, subject to environmental and regulatory approvals.

The 540 km expansion will follow and expand upon certain segments of the company’s existing pipeline systems from Taylor, BC southeast to Edmonton, with priority being placed on areas where debottlenecking is required.

The expansion will entail constructing a new 270 km 24 in. diameter pipeline from Fox Creek, Alberta, to the Edmonton area, which is expected to have an initial capacity of 320,000 barrels per day. Capacity is expected to increase to over 500,000 bpd with the installation of midpoint pump stations.

The Phase III expansion also contemplates increasing pipeline interconnectivity between Edmonton and Fort Saskatchewan including Pembina’s Redwater and Heartland Hub sites as well as third-party delivery points in these areas, which would provide customers to access a number of delivery points including fractionators, refineries, and storage hubs and increased access to pipeline and rail take-away capacity.

The contracts underpinning the Phase III Expansion are ten-year transportation services agreements for volumes that average over 230,000 bpd, or approximately 75% of the initial capacity, and that provide a steady, long-term EBITDA stream which is expected to be, on average, in the range of approximately $270 million to $300 million per year (see Non-GAAP measures below). The company expects to secure further transportation commitments over the next six to nine months.

The Phase III Expansion follows a series of growth projects on Pembina’s conventional pipeline infrastructure resulting from the ongoing successful development by oil and gas producers of resources plays in the Montney,Duvernay and Deep Basin Cretaceous formations.

With the addition of the Phase III Expansion, Pembina’s previously announced 2014 capital spending plan will increase from $1.5 billion to $1.7 billion.

Calgary-based Pembina Pipeline Corp. is a transportation and midstream service provider for the North American energy industry. It owns and operates pipelines that transport conventional and synthetic crude oil, condensate and natural gas liquids produced in western Canada; oil sands, heavy oil and diluent pipelines; gas gathering and processing facilities; and, an oil and natural gas liquids infrastructure and logistics business.