Inter Pipeline To Transport Diluent For Oil Sands Project

July 2009 Vol. 236 No. 7

Inter Pipeline Fund has signed a long term agreement with Imperial Oil Resources Ventures Limited to provide diluent transportation service for Imperial’s Kearl oil sands mining and extraction project located northeast of Fort McMurray.

Diluent will be transported on Inter Pipeline’s 12-inch pipeline that supplies diluent to the Athabasca Oil Sands Project owned by Shell Canada Limited, Chevron Canada and Marathon Oil Canada Corp. This 280-mile pipeline will be idled from its existing operation in 2010 after a new 42-inch pipeline, now under construction by Inter Pipeline, goes into service for the Athabasca Oil Sands Project.

Under a 25-year ship-or-pay transportation contract, Imperial has secured 60,000-bpd committed capacity on the pipeline beginning in late 2012, with an option to further increase its capacity commitment. Approximately $135 million will be invested by Inter Pipeline over the next three years to connect the existing pipeline to the Kearl Project at the north end of the pipeline and to diluent receipt points in the Edmonton area.

“This is an attractive long term deal for Inter Pipeline,” stated David Fesyk, president/CEO of Inter Pipeline. “Providing diluent service to the Kearl project makes excellent use of existing pipeline infrastructure.”

The Kearl Project is a large scale oil sands mining and extraction project under development by Imperial. Imperial is jointly owned by Imperial Oil Limited and ExxonMobil Canada. Imperial has stated that full development is expected to occur in three phases with total production potential of over 300,000 bpd of bitumen. The first phase is expected to produce 110,000 bpd and begin operations in late 2012.
Inter Pipeline plans to re-activate the idled existing 12-inch pipeline that runs from the Edmonton area to the Fort McMurray region to supply diluent for the Kearl Project for use in blending with bitumen. This 12-inch pipeline forms part of Inter Pipeline’s Corridor Oil Sands Pipeline System, providing diluent service to the Athabasca Oil Sands Project. Approximately 31 miles of 12-inch pipeline will be constructed to connect the existing pipeline to Imperial’s mining and extraction facilities. Diluent receipt connections will also be added at the south end of the pipeline in the Edmonton area.

Upon completion, the pipeline will have the potential to transport 120,000 bpd of diluent. Construction is expected to begin in mid 2010 and the pipeline is expected to be in-service late in 2012. Capital expenditures are estimated at $5 million in 2009 with the remainder of the expenditures to be incurred between 2010 and 2012.