Growth in Saskatchewan oil prompts expansion of pipeline

Move will benefit Calgary producers

Booming oil production in southwestern Saskatchewan prompted by new horizontal drilling and hydraulic fracturing technologies are prompting a $100-million expansion by Inter Pipeline Ltd.

The Calgary company announced Thursday it has ship-or-pay agreements with five oil producers to backstop the project, with terms ranging from four to 10 years.

“This high return investment is the largest expansion of a conventional oil pipeline system in our company’s history,” Christian Bayle, president and chief executive of Inter, said in a news release.

Inter is better known for its bitumen and diluent pipelines serving the oilsands in northern Alberta, moving 828,000 barrels per day in 2013.

Analyst Juan Jarrah of TD Securities said in a note to investors the expansion is good news for Dodsland, Sask., area producers who are sometimes forced to rely on higher cost trucking to get production out.

He said Calgary producers in the area include Raging River Exploration Inc., Spartan Energy Corp., Crescent Point Energy Corp., Surge Energy Inc., Penn West Petroleum Ltd. and Rock Energy Inc.

Inter said the new agreements on its Saskatchewan system are expected to generate $25 million to $30 million per year in incremental adjusted earnings.

Spokesman Tony Mate said the new production, mainly from the Viking light oil play, will be gathered by Inter and flow into the Enbridge main line for delivery to markets

The expansion, with 50 kilometres of new main line pipe, 40 kilome- tres of new laterals and associated pumping and metering facilities, should enter service in phases beginning in late 2014 with the project completed by the second quarter of 2015.

Inter said oil volumes have doubled to more than 70,000 barrels per day in the past two years with much of its Saskatchewan system operating at or near capacity.

The expansion will add about 95,000 bpd of capacity.

The new mainlines will initially flow at less than 50 per cent capacity but that is expected to grow over time.

For the Calgary Herald Inter Pipeline Ltd., known for its Polaris condensate pipeline in northern Alberta, is expanding its smaller Saskatchewan system.