Pembina Pipeline (Pembina) has revealed a capital spending plan for 2010 of $240m to expand its oil sands and heavy oil business.
Approximately $152m or about 60% of Pembina’s 2010 capital budget is allocated for the construction of the Nipisi and Mitsue pipeline projects. The two projects, which support the company’s oil sands and heavy oil business strategy, were initiated in response to industry demand for diluted heavy oil take-away from and diluent supply to the region north of the town of Slave Lake, Alberta, the company said.
Regulatory decisions relating to the projects are currently anticipated by September 2010 and construction will begin once approvals have been granted. Approximately 80% of the project engineering is complete and the projects are expected to be completed in mid-2011.
The two pipelines, estimated to cost $440m combined, remain on budget and to date the company has entered into procurement agreements that have generated certainty for about 60% of the cost estimate. As of December 31, 2009, Pembina has spent approximately $76m on the projects.
In addition to spending on the Nipisi and Mitsue Pipelines, Pembina’s capital spending plans for 2010 include investing approximately $46m in revenue generating projects within its conventional pipelines business, primarily to increase capacity at certain sites and improve the operational performance and integrity of its Peace, Drayton Valley and Western systems.
Pembina’s midstream and marketing business is expected to invest approximately $35m on projects designed to expand terminals, storage facilities and gas processing facilities. The remainder of the 2010 capital budget supports various projects across Pembina.
Pembina continues to examine other investment opportunities which, pending approval of the board of directors, could increase the 2010 capital expenditure budget.
The 2010 capital expenditure plan will be financed through undrawn credit facilities, Pembina’s Premium Distribution and Distribution Reinvestment Plan and cash flow from operating activities. The company’s business model is expected to deliver a portion of cash flow derived from operating activities where returns are primarily investment driven and independent of commodity prices or capacity utilization.
Pembina transports crude oil and natural gas liquids produced in Western Canada, owns and operates oil sands pipelines, and has a presence in midstream and gas services.