Pembina to provide terminal services for new Canada diesel refinery

Pembina Pipeline will provide terminalling services for the North West Redwater Partnership with respect to North West's planned Sturgeon refinery, the company announced on Thursday.

Separately, Pembina also announced that it has entered into agreements to construct a new pipeline lateral in the Karr area of Alberta (the "Karr Lateral") to service growing production from the Montney resource play.

"Pembina is very excited to be involved in this world class project," said Mick Dilger, Pembina's CEO. "The Sturgeon Refinery will be the first refinery to be built in Canada in 30 years and will add significant value to Alberta's bitumen resources in a responsible and sustainable manner."

The terminalling services will be provided by Pembina to North West under a 30-year fixed return agreement and a 10-year natural gas liquids (NGL) mix purchase and sale agreement related to the third fractionator Pembina is constructing at its Redwater site.

"We are developing the facilities associated with the terminalling services at our existing Redwater site, once again demonstrating the value we are able to provide customers by leveraging our integrated suite of assets," said Robert Lock, Pembina's vice president of NGLs and midstream. "Further, the long-term, contracted nature of the terminalling services to be provided by Pembina in support of the Sturgeon Refinery will be beneficial to our shareholders as they will add to our growing fee-for-service-based, low-risk cash flow stream."

Pembina says it expects a capital investment of $180 million will be required to construct the terminalling facilities. The facilities include truck and rail loading, storage, as well as handling and processing equipment for a variety of products delivered from North West. 

Subject to regulatory and environmental approvals, the facilities are expected to be in service mid-2017. 

Previously, North West had entered into agreements for terminalling services with Provident Energy, which was acquired by Pembina on April 2, 2012. Since that time, the development of the project has progressed and changes have been included in the project's scope. The $180 million of expected capital is included in Pembina's previously disclosed suite of projects totalling $5.9 billion.

Pembina expects the Karr Lateral to cost $55 million and have a capacity of approximately 30,000 bpd. The Karr Lateral is underpinned by long-term, fee-for-service agreements, which include substantial take-or-pay commitments from several of Pembina's customers. A portion of the volume under contract on the Karr Lateral will be incremental to Pembina's previously disclosed committed volumes. 

The Karr Lateral will flow from legal land description 01-28-65-03 west of the 6th meridian to Pembina's terminal in the Lator area of northwest Alberta, where several companies are developing significant Montney acreage. 

Subject to regulatory and environmental approvals, Pembina expects the Karr Lateral to be in-service in early-2016.

"The Karr Lateral will allow our customers operating in this attractive area of the Montney to access our Phase III pipeline expansion and ultimately get their production to market," said Jason Wiun, Pembina's vice president of conventional pipelines. "This lateral is one of many that Pembina is working on as part of the Phase III expansion which will provide pipeline transportation service for producers in areas of the Western Canadian Sedimentary Basin where more expensive and logistically challenging options such as trucking or rail are the only alternatives. These projects demonstrate that Pembina can continue to generate significant capital investments through the delivery of safe, reliable and cost effective pipeline options."