Terasen boosts pipeline capacity

Terasen boosts pipeline capacity
Gordon Jaremko, Vancouver Sun, 09-Aug-2005
Terasen's plan to push pipeline expansion fits suitor's strategy
Dave Ebner, Globe and Mail, 09-Aug-2005

Gordon Jaremko
Vancouver Sun
09-Aug-2005

EDMONTON -- Terasen Inc. has started work aimed at doubling the capacity of a pipeline in Alberta, getting a quick start on fulfilling oil sands growth ambitions that prompted the $6.9-billion takeover on Aug. 1 of the company by Houston-based Kinder Morgan Inc.

The $800-million expansion of the Corridor pipeline between Fort McMurray and Edmonton will double capacity by 2009 and allow for increased flows later.

Engineering, environmental planning and community consultation began on initial plans to raise shipments to 500,000 barrels per day from 260,000 by laying a new jumbo pipe, 105 centimetres in diameter, in Corridor's right-of-way.

Although the plan calls for the 450-kilometre line to be dedicated to the Athabasca Oil Sands Project at first, Terasen president John Reid has predicted Corridor traffic could double again to one million barrels eventually.

Talks are underway with Athabasca senior partner Shell Canada Ltd. on "meaningful incremental opportunities in terms of third-party volumes," Reid told a telephone conference call for analysts and media.

Corridor was built in 2002 solely to link the Athabasca project's Muskeg bitumen mine near Fort McMurray to its oil upgrader at Shell's Edmonton-area Scotford refinery, Terasen spokesman Philippe Reicher said.

But industry demand is on the rise for capacity to ship bitumen, a heavy oil, from the Fort McMurray region to Edmonton-area processing sites.

On top of a $4-billion, 140,000-barrels-daily expansion announced by Athabasca and a lineup of other production projects in the Fort McMurray region, construction is beginning on the $1.8-billion Heartland Upgrader at Fort Saskatchewan. Northwest Upgrader is proposing a second new plant northeast of Edmonton to turn bitumen into refinery-ready light oil.

Delivery capacity could be rapidly increased with low-cost additions of pumps to the new jumbo pipe that will be laid in the Corridor right-of-way, Reicher said. The added pipe will be more than double the size of the current line.

"We are embarking on a very exciting project," Terasen Pipelines president Rich Ballantyne said in a statement.

Terasen is also awaiting approval from the National Energy Board for a $210-million capacity addition on its Trans Mountain Pipe Line from Edmonton to Vancouver to increase oil sands shipments.

The NEB application is the first step in a staged, $2.57-billion growth plan that eventually includes a new Trans Mountain branch line across B.C. to a deep-water port at Kitimat or Prince Rupert for oil sands tanker exports to the U.S. and Asia.

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Dave Ebner
Globe and Mail\
09-Aug-2005

CALGARY - Terasen Inc. is pushing ahead with an $800-million pipeline expansion to move more raw output from the Alberta oil sands to Edmonton for processing.

The announcement, made yesterday, fits within the overall strategy of Houston-based Kinder Morgan Inc., which last week unveiled a $3.1-billion (U.S.) deal to buy Vancouver-based Terasen for its exposure to growth in the oil sands.

There are "hellacious opportunities" for growth in the region, Richard Kinder, chairman and chief executive officer of Kinder, told investors on a conference call last week.

Terasen wants to roughly double the capacity on its Corridor pipeline by 2009 to about 500,000 barrels a day of diluted bitumen, from 260,000 currently.

The line could eventually carry upward of 1.5 million barrels of diluted bitumen a day, Rich Ballantyne, president of Terasen Pipelines, said in an interview yesterday.

The Corridor system, whose main line is 500 kilometres, connects the Athabasca Oil Sands Project, majority owned by Shell Canada, north of Fort McMurray with a Shell upgrader and refinery outside of Edmonton. Increasing capacity will require a new pipeline to be built alongside the existing line, and Terasen, in a press release yesterday, said engineering and environmental work has begun.

The expansion could cost $800-million, Terasen CEO John Reid said in late July on a conference call to discuss quarterly results.

There "isn't that much more money after that" that needs to be spent to further expand the line toward 1.5 million barrels of diluted bitumen, Mr. Ballantyne said. Once the new line is built - with a diameter of about one metre - it will only need additional pumping stations along the line to move more diluted bitumen through it, he explained.

That level of capacity also means Corridor could carry production from other companies beyond Shell, Mr. Ballantyne said, deals that Terasen is looking at right now.

Terasen said it plans to file regulatory documents this fall for the first expansion and hopes to begin cons tructioninlate2006.p

Athabasca, majority owned by Shell Canada, said in April it aims to nearly double its production of raw bitumen to 300,000 barrels a day by 2010. Athabasca produced a daily average of 164,200 barrels of bitumen in the April-June period.

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