Pembina's Peace Pipeline expansions pick up steam after Keystone XL cancellation

Houston — Pembina Pipeline Feb. 26 said it aims to move forward soon with the Phase VIII and IX expansions of its Peace Pipeline system following the defeat of the Keystone XL Pipeline project, as the Canadian company sees renewed customer interest for more capacity and pipeline segregation to ship crude oil, condensate and NGL volumes.

After authorizing a scaled-down version of the Phase VII expansion in Alberta in December, Pembina CEO Mick Dilger said during a Feb. 26 earnings call that phases VIII and IX could be restarted in the second quarter as global demand shows more signs of rebounding.

The projects all were indefinitely delayed once the coronavirus pandemic took hold last year, but Pembina aims to press ahead faster than much of the industry now that front-month NYMEX WTI is trading well above $60/b. The overall goal is to provide additional capacity and single-product-line services for its liquids pipelines to move more crude oil, condensate and ethane- and propane-focused NGL mixes.

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"When we get the signal, we'll turn VIII and IX on, and we think we'll get the signal in the second quarter," Dilger said, previously noting, "I don't think many people thought we'd be at $60 WTI."

Dilger acknowledged a bit of a turning point in customer interest after Joe Biden became president-elect. President Biden followed through on his campaign pledge during his first day in office on Jan. 20 by revoking the permitting for TC Energy's Keystone XL heavy crude oil project.

"With KXL being canceled, we had a flood of interest of customers being interested in our Phase VII project," Dilger said.

And potential customers who were not able to contract after Phase VII are on the top of the list for the subsequent phases, he said.

Dilger acknowledged some reluctance in deferring the projects at all last year.

"It wasn't great for us, but it wasn't all bad," Dilger said. "And our customers really appreciated the pause."

Alberta focus

Pembina has a renewed focus on its Canadian pipelines and terminals with its US Jordan Cove LNG and Ruby Pipeline projects indefinitely delayed, he said.

The Phase VII expansion will not come online until early 2023, but Pembina cut the project costs by nearly $140 million down to about $610 million while reducing the planned pipeline capacity from 240,000 b/d to 160,000 b/d.

Phase VII includes a new 20-inch pipeline, pump stations and terminal upgrades in the LaGlace-Valleyview-Fox Creek corridor and is aimed at meeting transportation needs arising from the growth of condensate supply in the Western Canadian Sedimentary Basin.

Once Phase VII is completed, Pembina said it will have 1.1 million boe/d of Edmonton-area market delivery across the company's Peace and Northern pipeline systems.

Likewise, the nearly $400 million Phase VIII would includes new 10- and 16-inch pipelines in the Gordondale-to-La Glace corridor of Alberta, as well as six new pump stations or terminal upgrades located between Gordondale and Fox Creek, Alberta. Phase VIII will enable segregated pipeline service for ethane-plus and propane-plus NGL mixes from the central Montney area at Gordondale into the Edmonton area for market delivery.

The smaller, roughly $80 million Phase IX project would include new 6- and 16-inch pipelines debottlenecking the corridor north of Gordondale as well as upgrades at one pump station.

This expansion would allow existing pipelines, which are currently batching, to convert to single product lines. Then, Pembina would have largely completed its goal for segregated liquids transportation services for ethane-plus, propane-plus, crude and condensate across multiple pipeline systems between Gordondale and the Edmonton area.

An additional, unauthorized Phase X optimization project eventually would add another 100,000 boe/d of incremental capacity.