Calgary – Inter Pipeline Ltd. is spending $65 million this year on a crude oil storage tank expansion at the Kerrobert Terminal on their Mid-Saskatchewan pipeline system.
The project will include the construction of three new tanks totalling approximately 400,000 barrels of storage capacity.
The expansion is expected to ready for service in late 2016 at a total cost of $100 million.
“The project has strong customer support and is in direct response to increased demand for new operational and merchant storage infrastructure at the Kerrobert oil hub,” said Chris Bayle, Inter Pipeline’s president.
Bayle spoke to investors about the project during a conference call on May 11 as one of the highlights of the company’s strong first quarter performance despite low oil and gas prices.
“We are very pleased to report another highly successful for Inter Pipeline both operationally and financially,” he said.
“Operating cash flow for this period was the highest in our history led by the oilsands transportation and conventional oil pipeline business segments.
“Collectively these two segments transported a record 1.3 million barrels per day and generated approximately 80 per cent of quarterly funds from operation before corporate cost allocations.”
Inter Pipeline moved a record 1.1 million barrels per day in the quarter on their oilsands pipeline systems.
They also transported over 214,000 bpd on their three conventional oil gathering systems, the highest quarterly total in eight years.
“Our conventional oil pipeline business particularly our Mid-Saskatchewan system continues to enjoy strong growth,” said Brent Heagy, chief financial officer.
Throughput volumes on the system rose nearly 12 per cent year over year to a record 76,000 bpd per day during the first quarter of 2015.
“Drilling activity in the Viking formation surrounding the Mid-Saskatchewan pipeline system continued to be strong during the quarter,” said Heagy.
Inter Pipeline spent $130 million of its $400 million capital program for 2015 in the quarter on projects predominantly related to expansions on their oilsands and conventional oil pipeline systems.
“Future growth capital in 2015 will be directed for expansion of our Mid-Saskatchewan systems, pipeline and storage construction and pump station work on our Cold Lake pipeline system, as well as completing diluent connections on our Polaris pipeline system,” said Heagy.
He noted the ongoing expansion of the Mid-Saskatchewan system at Kerrobert is anchored by five oil producers who have entered into take or pay contracts for terms of up to 10 years.
“The expansion includes constructing additional capacity on the system to accommodate future growth to potential new third party transportation connections,” said Heagy.
Production growth in the region is attributed to strong horizontal drilling and multi-stage fracturing activity in the Viking light oil play surrounding the Mid-Saskatchewan pipeline network.
Inter Pipeline’s long-term outlook for their conventional oil pipelines segment remains positive despite the current weak crude oil price environment.
“In this environment, Inter Pipeline continues to be well positioned to grow and provide stable returns to shareholders,” said Bayle.
“We have a strong balance sheet, visible long-term growth and a cash flow stream that is largely underpinned by stable cost of service contracts.”