(All financial figures are approximate and in Canadian dollars unless otherwise noted.)
CALGARY, Nov. 28, 2013 /CNW/ – Pembina Pipeline Corporation (“Pembina” or the “Company”) (TSX: PPL; NYSE: PBA) announced that its Board of Directors has approved a capital spending plan of approximately $1.5 billion for 2014. This is approximately 56 percent higher than last year’s capital budget and represents the largest in the Company’s history.
“Pembina’s capital spending plan for 2014 is indicative of the substantial suite of growth projects we have before us, the majority of which are under long-term, fee-for-service agreements,” said Mick Dilger, President and Chief Operating Officer. “This investment is directly aligned with our goal of providing long-term and sustainable value to our shareholders.”
The Company’s 2014 capital plan is largely driven by its success in securing growth opportunities in 2013. Approximately $1.3 billion, or 85 percent of the total capital, is associated with previously announced projects.
2014 Capital Spending Highlights
Pembina’s 2014 capital spending plan is expected to be allocated as follows:
|($ millions)||2014 Budget|
|Oil Sands & Heavy Oil||60|
Pembina plans to spend approximately $670 million in its Conventional Pipelines business, 44 percent of its overall 2014 capital spending plan. The spending will be primarily directed to major projects, as follows:
- Pembina expects to spend $215 million in 2014 to complete its previously announced Phase II Low Vapour Pressure Expansion, which will increase crude oil and condensate capacity on the Company’s Peace Pipeline by 55,000 barrels per day (“bpd”). Completion is expected by late-2014, at which time the Peace Pipeline will have a capacity of 250,000 bpd. This expansion will accommodate increasing crude oil and condensate volumes resulting from continued producer activity in the crude oil and condensate-rich areas of the Montney resource play in the Dawson Creek, Grande Prairie and Kaybob/Fox Creek areas, as well as development of the condensate-rich Duvernay resource play in the Kaybob area.
- The Company expects to spend $240 million in 2014 to progress its previously announced Phase II NGL Expansion on its Peace and Northern natural gas liquids (“NGL”) Pipelines (the “Peace/Northern NGL System”) to add an additional 53,000 bpd. Completion is expected by mid-2015, at which time the Peace/Northern NGL System will have a capacity of 220,000 bpd. This expansion will provide increased transportation capacity for producer activity focused on NGL development, which continues to be strong in the Deep Basin Cretaceous, Montney and Duvernay resource plays.
- Pembina also expects to spend $95 million to complete its previously announced Simonette Pipeline Expansion on its Peace Pipeline between Simonette and Fox Creek, Alberta. The new pipeline is expected to be in-service in the third quarter of 2014, subject to the necessary environmental and regulatory approvals. Once this new pipeline is completed, Pembina will have three pipelines in the corridor between Simonette and Fox Creek capable of segregating and shipping various grades of crude oil, condensate and NGL.
Pembina’s Conventional Pipelines business also has plans for several other new connections and upgrades in 2014 totaling approximately $120 million. These investments are aimed at ensuring maximum integration and optimization of value chain opportunities.
Oil Sands & Heavy Oil
Pembina’s expenditures in its Oil Sand & Heavy Oil business are expected to total $60 million, or four percent of the overall 2014 budget, and will largely be used to progress work on the proposed Cornerstone Pipeline under an engineering support agreement, as previously announced.
Pembina plans to allocate approximately $260 million, or 17 percent, of its 2014 capital budget to Gas Services. The majority of this investment is directed to the construction of several new facilities within its Gas Services business.
- Resthaven Facility – $75 million is planned to be directed towards completing the 200 million cubic feet per day (“MMcf/d”) (130 MMcf/d net to Pembina) combined shallow cut and deep cut NGL extraction facility, which is expected be in-service in the third quarter of 2014;
- Musreau II Facility – $75 million is planned to be directed towards the 100 MMcf/d shallow cut gas plant and associated infrastructure, which is expected be in-service in the first quarter of 2015; and
- Saturn II Facility – $100 million is planned to be directed towards the 200 MMcf/d ‘twin’ of the Saturn I Facility, which is expected be in-service by late-2015.
By the end of 2014, Pembina expects that its gas processing capacity will increase to approximately 700 MMcf/d (net).
The Company continues to allocate its capital spending in Midstream on initiatives that increase its fee-for-service business. For 2014, capital expenditures of $510 million, or 33 percent of the overall budget, is projected to be spent in Midstream.
In crude oil Midstream, Pembina expects to spend $145 million to expand its current service offerings and enhance the interconnectivity of the infrastructure it accesses. Specific projects include:
- $45 million is expected to be spent in 2014 to expand above ground storage capacity from 310,000 barrels to 850,000 barrels at Pembina’s Edmonton terminal, which is expected to be in-service in mid-2015;
- $50 million is expected to be spent in 2014 on completing one full-service terminal (scheduled to come on-stream in 2014) and the initiation of four additional full-service terminals;
- $15 million is expected to be directed towards increasing pipeline connections for the Pembina Nexus Terminal; and
- $15 million is expected to be directed towards the start of a multi-year infrastructure build-out at the recently acquired Pembina Heartland Hub site focussed on unit train crude oil loading, storage and pipeline connections.
The majority of capital expenditures in the NGL Midstream business for 2014, which is expected to total $365 million, will be directed towards construction of Pembina’s previously announced RFS II – a ‘twin’ of its existing 73,000 bpd fractionator at its Redwater site. The Company also plans to invest capital to:
- Complete upgrades at the existing Redwater fractionator including an optimization project that is anticipated to increase the propane-plus throughput by up to 9,000 bpd; and
- Provide additional third-party storage and terminalling solutions including development of additional underground storage caverns.
Capital Spending Summary
During the year ahead, Pembina will continue to focus its efforts on expanding, diversifying and integrating its assets along the hydrocarbon value chain to better provide services for its customers and enhance long-term shareholder returns. Roughly 60 percent of the planned expenditures in 2014 will be directed towards Pembina’s NGL-related value chain activities and the remaining 40 percent will be directed towards the Company’s crude oil and condensate-related value chain activities.
Commercial and Operational Update
Crude by Rail Activities
In October 2013, Pembina converted a segment of its existing rail infrastructure at the Company’s Redwater facility, which is serviced by Canadian National Railway Company, to offer crude oil unit train service. This service was implemented to facilitate efficient and cost-effective loading and transportation for the Company’s existing crude oil rail customer. The first crude oil unit train left the site at the end of October. Pembina plans to develop further unit train capability at its Heartland Hub site over the next several years.
“Pembina was able to leverage its existing Redwater facility rail infrastructure to implement unit train services,” said Bob Jones, Vice President, Midstream – Crude Oil & Condensate. “It is our understanding that this was the first crude oil unit train to be moved out of western Canada and we are very proud of this accomplishment. This service offers our existing and future customers the benefits of diversified market access, additional take-away capacity out of the Alberta Industrial Heartland and very attractive transportation fees. While this currently represents a fairly small aspect of our business, crude oil loaded onto rail cars by pipeline is a growth focus for us, as we believe that it represents an important outlet – complementing export pipelines – for production from the Western Canadian Sedimentary Basin.”
Pipeline Acquisition & Construction
In November 2013, Pembina acquired a 60 kilometre segment of pipeline that extends north from Edson towards Fox Creek, Alberta for approximately $23 million (the “Acquired Pipeline”).
The Acquired Pipeline will be connected to a Pembina-owned pipeline in close proximity, which reaches south from Fox Creek towards Edson. The two pipelines will form a new NGL system as part of a strategic initiative for Pembina to increase its NGL gathering capacity in the area. Once work on the pipelines has been completed, which is currently anticipated to be mid-to-late-2015, the Company expects to be able to offer 50,000 bpd of NGL capacity from Edson to Fox Creek. Volumes from the area would further support Pembina’s plans to expand its pipeline capacity from Fox Creek into Edmonton, Alberta (as per its previously announced Simonette Pipeline Expansion and Open Season).
Pembina currently owns and operates a second NGL pipeline in the area, and intends to convert this pipeline to condensate service. Both pipelines would operate in tandem, providing segregated condensate and NGL transportation out of the Edson area to Fox Creek.
“We are very excited to extend our capture area into this developing region by leveraging our existing asset footprint,” said Paul Murphy, Senior Vice President, Pipeline & Crude Oil Facilities. “As with our other announced pipeline expansions, we believe this new capacity will help ensure our customershave