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Inter Pipeline set for Fort McMurray restart as fire threat abates

Inter PipelineLtd. said its conduits in and out of the oil sands region of northeasternAlberta are intact and ready to operate in the wake of a wildfire that shut morethan 1 million barrels a day of production in the area.

The company declined to comment on deliveries of condensate,ultra-light oil products that are used to thin tar-like bitumen for shipping bypipeline, into the region even though many of the biggest customers on its networkhave shut operations. CEO Christian Bayle said May 10 on the Calgary, Alberta-basedcompany's earnings conference call that revealing volumes on the system would giveaway confidential information about the pipeline's customers.

"I'm just not going to answer any specific questions onwhat volumes that may or may not be flowing to any specific customer," Baylesaid when asked about deliveries to the Kearl and Sunrise oil sands projects, bothof which have been shut without restart dates announced. "I can confirm thatno pipeline assets incurred significant damage as a result of fires. We are workingclosely with our customers to meet their transportation needs."

Pipelines and production facilities were largely spared damageby a wildfire that rippedthrough the oil sands hub of Fort McMurray, leading to the evacuation of almost90,000 people and the destruction of some communities. While oil sands operatorssafely shut down their mines and processing plants, restarting the facilities maytake weeks as the companies try to reassemble and accommodate workers who have beenscattered by the evacuation. Operations at Kearl, which is owned by the Canadianunit of Exxon Mobil Corp.,and Husky Energy Inc.'sSunrise project are among the projects where operations have been slowed or suspended.

Inter Pipeline's two biggest oil sands conduits, the Polarissystem which hauls condensate into the region and the Corridor pipeline which takesbitumen out, can carry as much as 485,000 bbl/d. While both systems were brieflyshut, the lines are buried, remotely operated and surface facilities like pumpingstations are in cleared areas to protect them from fire.

Rival pipeline operator EnbridgeInc. said in a May 10 statement that its Cheecham facility, a majoroil sands hub located south of Fort McMurray, remains shut and that its Athabascaterminal is operating with minimum staff.

Inter Pipeline hauled about 1.1 million bbl/d on its pipelinesin the first quarter, with a 28% rise on the Polaris system to 170,700 bbl/d offsettinga dip in oil sands volumes, which were hurt by lower commodities prices. Funds fromoperations at Inter Pipeline's European storage business surged 53% to a recordC$31.3 million. The storage business continues to grow as demand from traders tostore petroleum products has enabled the company to boost prices.

"We have been successful on both fronts — almost uniformlyprices are up as we are recontracting our storage capacity," Bayle said. "Weare also pushing out term in certain select cases. We now have secured a meaningfulamount of capacity to 2017 and some into 2018."

Despite the company's success in Europe, it isn't consideringexpanding the business in North America by buying up tank farms at idled refineries.Bayle said those types of projects are difficult to complete.

"We haven't approached any of the owners of these facilities,"Bayle said. "Through our experience in Europe, those can be extremely difficultprojects to execute. They look great on paper but sometimes once you start executingthose conversions they can be extremely costly."