CALGARY – Inter Pipeline Fund (TSX:IPL-UN.TO) has reached binding long-term commitments for an expanded oilsands pipeline system that it plans to build for about $2.6 billion.
The commitments will be initially for 20 years with options that could increase the length of the commitments to 30 years.
The company says it will build 840 kilometres of new pipeline and seven new pump stations to serve three oilsands operations owned by the FCCL Partnership.
FCCL is a partnership between Cenovus Energy (TSX:CVE.TO) and ConocoPhillips (NYSE:COP)
It owns the Foster Creek, Christina Lake oilsands operations and the Narrows Lake development project.
Inter Pipeline had announced last July that it planned to integrate and expand its Cold Lake and Polaris pipeline systems, assuming it got the necessary commitments from oilsands producers.
It said Tuesday the pipeline project’s cost will above the previous $2.2-billion estimate due to changes in the services requested and other refinements.
The plans call for Inter Pipeline to provide capacity to transport 500,000 barrels per day of bitumen blend and 350,00 barrels per day of diluent.
Diluent is used to soften the tarry oilsands, or bitumen.
Deliveries of diluent to Foster Creek and Christina Lake are expected to begin in mid-2014.
By mid-2007, after Narrows Lake goes into commercial production, Inter Pipeline expects the pipeline project will generate between $260 million and $290 million per year of earnings before taxes, depreciation, and amortization.