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Husky’s Pikes Peak South thermal in this undated photo. (Courtesy of Husky Energy)
Husky’s Pikes Peak South thermal in this undated photo. (Courtesy of Husky Energy)

Husky Energy signs on to four proposed pipelines Add to ...

Husky Energy Inc. has signed up for capacity on four proposed pipelines to move growing volumes of heavy crude from its Western Canadian operations, although it has enough current space to meet its needs until the end of the decade, its chief executive said.

Husky, which is developing the Sunrise oil sands project along with BP PLC and numerous heavy oil fields, has secured capacity on Enbridge Inc.’s Northern Gateway and Kinder Morgan Energy Partners’ Trans Mountain Expansion pipelines to the West Coast, the company said at its investor day on Wednesday.

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It has also signed up for TransCanada Corp.’s Energy East pipeline to Atlantic Canada and Enbridge’s Flanagan South project in the U.S. Midcontinent region.

“Through 2020, we are quite comfortable that we’ve got enough (capacity) in place with existing commitments,” Husky CEO Asim Ghosh said in an interview following the meeting. “And within that time frame, I have a high degree of confidence that at least one or two of these other pipelines will come to pass.”

The industry’s difficulties in getting such projects approved has been blamed for occasional deep discounts on heavy crude and bitumen, as supplies get backed up in Alberta. Mr. Ghosh has said Husky’s integrated structure, comprising production, upgrading and refining in Canada and the United States, has removed a lot of the commodity-price risk.

Enbridge is expecting a federal go-ahead decision on the contentious Northern Gateway project this month, though it may face further delays as a result of court action promised by its opponents. The Trans Mountain and Energy East pipelines are targeted to be in service in the latter part of the decade and neither has been through a public hearing yet.

Husky, which is controlled by Hong Kong billionaire Li Ka-shing, expects to more than double its steam-driven heavy oil production to more than 80,000 barrels a day by 2020, it said on Wednesday. Overall oil and gas liquids output averaged 242,000 barrels a day in the first quarter.

Mr. Ghosh said the company “dabbles” in rail transport for its crude to understand the market and move small volumes that do not fit into its pipeline commitments.

Husky said costs have crept up at the Sunrise project, due to start producing 60,000 barrels a day later this year. It now expects the steam-assisted gravity drainage project to run more than the last estimate of $2.7-billion. Vice-president John Myer did not provide a new price tag, saying the figure would be finalized later this year.

The company expects to offset the overrun with savings in the sustaining capital invested once the project starts operating, Mr. Ghosh said. That includes engineering technology that will improve the ratio of steam injected to oil produced, he said.

Mr. Ghosh said all indications from Mr. Li are that Husky, whose shares have climbed 26 per cent in the past year, remains a core holding in his empire.

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