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Inter Pipeline aims to tap into growing east Duvernay crude market

Inter Pipeline Ltd. plans to enter the growing east Duvernay Shale transportation market by expanding a terminal in central Alberta to handle liquids from the region.

The company plans to add 30,000 barrels per day of truck unloading capacity, along with a pair of 130,000-barrel storage tanks, to its Central Alberta pipeline near the town of Stettler, CEO Christian Bayle said on an Aug. 10 conference call. Trucks will transfer liquids from east Duvernay wells to the terminal, which Inter Pipeline expects to add C$20 million in EBITDA annually when it goes into service in 2020. "We're dipping our toe ... into this, call it, base expansion in the tanks," Bayle said. "The barrels are there today to support the investment, and we can get this done relatively quickly."

The east Duvernay, part of the larger Duvernay Shale formation, is light-oil-producing zone that stretches across south-central Alberta. Production from the region is being shipped by rail and bypassing Central Alberta, a feeder pipeline that carries crude to a hub in Edmonton, Alberta, Bayle said. The expansion is "going to facilitate almost ... a doubling of our handling of this type of product, which will drive that incremental EBITDA once everything is in service," he said. If the initial expansion is successful, the company has plans to add subsequent capacity.

Shale gas exploration in the Duvernay and Montney regions, which straddle the Alberta-British Columbia border, has boosted output of NGLs. Inter Pipeline, a major processor of the liquids, saw record funds from operations of more than C$100 million from its NGL unit in the second quarter. The company bought the Canadian NGL processing business of Williams Cos. Inc. in 2016 and is moving forward with a plan to build a C$3.5 billion complex that includes a propane dehydrogenation plant to process the liquid into propylene. Bayle said the facility remains on budget and is expected to start operations in 2021.

On Aug. 9, Inter Pipeline reported second-quarter net income of C$136.1 million, or 35 Canadian cents per share, up from C$102.3 million, or 27 cents per share, in the year-ago period. Revenue for the quarter was C$631 million, up from C$516 million in the year-ago quarter.