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Pembina to test waters on Alliance gas pipeline expansion into Midwest

Pembina Pipeline Corp. plans to survey shipper interest in boosting natural gas exports to the U.S. Midwest from Western Canada along its Alliance Pipeline network.

Pembina, which owns the 1.6 Bcf/d Alliance line with Enbridge Inc., has plans for an open season for new capacity in the first quarter, CEO Mick Dilger said on a conference call. The pipeline expansion would be in service by late 2021, he said.

Rival TransCanada Corp. in 2017 successfully campaigned to get about 1.5 Bcf/d of new long-term contracts on its mainline system that also originates in the Western Canadian Sedimentary Basin. A deep discount in shipping was offered to fill empty space on TransCanada's network and to help producers in Canada's prolific Montney and Duvernay shales compete with Appalachian shale gas that has flooded the U.S. Midwest and Central Canada.

"There is still strong demand for gas export in the basin," Dilger said on the Feb. 23 call. "So, in terms of Alliance, we're continuing to progress towards formally launching the open season here in the first quarter."

The idea of expanding Alliance was first floated by former owner Veresen Inc. in March 2017. That expansion of 500 MMcf/d would have been in service by 2020. Two months later, Pembina agreed to purchase Veresen for C$9.7 billion. The company said the Veresen assets added proportionally consolidated operating margin of C$214 million in the fourth quarter.

The Alliance system went into service in 2000. In addition to Canadian gas, it also carries fuel from the Williston Basin in North Dakota. The line connects to plants in the Chicago region, where NGLs can be stripped and sold separately from the gas, and to pipelines that feed the Midwest and central Canada. Alliance Pipeline Limited Partnership operates the Canadian portion of the line, while Alliance Pipeline LP runs the U.S. operation. Veresen and Enbridge each own 50% of both entities.

The company got Veresen's in-development Jordan Cove Energy Project LP export plant in the acquisition. Pembina continues to pursue commercial contracts for the plant on the Oregon coast and has committed C$135 million to it in its 2018 capital plan, Stuart Taylor, head of corporate development, said on the call. The company plans to make a final investment decision on the project, which has been bogged down by regulatory problems that included rejection by the Federal Energy Regulatory Commission, once it gains the needed approvals.