Pipeline expansion moves ahead in Alberta

While controversy surrounds the proposed Keystone XL and Northern Gateway projects, a number of smaller pipeline builds or expansions are going ahead in northern Alberta with barely a whisper.

Despite transportation bottlenecks in getting crude out of landlocked Alberta, burgeoning local pipeline infrastructure in the province's oil sands regions reflects the desire of producers to find new routes to move increasing production.

"In Western Canada, more services are needed, more investment is needed," said FirstEnergy Capital Corp.'s Steven Paget.

And in Alberta, pipelines have never been as big a concern as they are in other parts of North America, he said.

Two provincial pipeline plans announced Wednesday aren't likely to encounter the friction faced by those that leave Alberta's boundaries.

Inter Pipeline Ltd. on Wednesday announced a $1.3-billion capital expenditure program for 2014, most of which will go toward expanding its oil pipeline capacity, primarily for its Polaris system for diluent transportation, and its Cold Lake system, the largest transportation network for Cold Lake-area bitumen production.

"Although spending is higher than we had originally forecast, we note that the majority of the 12 per cent upward cost revision for the Cold Lake and Polaris expansion projects is expected to be recovered from customers," analyst Robert Kwan of RBC Capital Markets said in a note on the news.

Also on Wednesday, Enbridge Inc. announced it would build $200-million in new facilities at its Sunday Creek terminal to adapt to production growth from the Christina Lake oil sands project, which is located in the southern portion of the Athabasca oil sands region, and is operated by Cenovus Energy Inc., and 50 percent owned by ConocoPhillips Co.

The expansion at the Enbridge terminal is expected to be completed in late 2015. The work includes development of a new site adjacent to the existing terminal, construction of a new 350,000 barrel tank with piping, pumps and measurement equipment, as well as preparatory site work for a future tank.

"This expansion furthers Enbridge's plans to bring incremental volume from projects in the region to the Athabasca Twin pipeline," Guy Jarvis, Enbridge's executive vice-president of liquids pipelines, said in a news release.

Mr. Paget said other examples of significant capital being directed to regional pipeline and infrastructure growth abound. They include Gibson Energy Inc. – which has plans to spend $230-million on capital expenditures this year, much of it for projects at the Edmonton and Hardisty, Alta., terminals – and TransCanada Corp., which has begun work on Alberta-based projects such as its Northern Courier pipeline, a system that will begin transporting crude oil from Suncor Energy Inc.'s Fort Hills mine site to tank facilities north of Fort McMurray some time in 2017.

The main goal is always to bring oil to a place where another pipeline will pick it up and take it further, but the "unfavourable regulatory environment" for long-distance pipelines, especially into the U.S., means the industry is also building more rail hubs to connect oil to markets, he noted.

Mr. Paget said the growth in regional pipelines in Alberta is not surprising.

"In Alberta, we generally live with pipelines. We understand they're very useful for getting product to market," he said. "But we also have a very big economic interest in development."