Keyera joins Enbridge crude-oil diluter pipeline

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Enbridge Inc.'s billion-dollar plans for a pipeline to transport a diluting agent needed for oil sands project expansions moved one step closer to completion with confirmation that Keyera Corp. will become a non-operating owner in the conduit to Fort McMurray, Alta.

Diluent is used to thin heavy crude and allow it to flow through pipelines, and an ample supply is required to transport growing bitumen production from northern Alberta to oil markets. The planned Norlite pipeline system will transport 280,000 barrels per day of diluent from Fort Saskatchewan, just northeast of Edmonton, to the Athasbasca oil sands region. Additional pump stations could bring capacity to more than 400,000 barrels a day. Earlier this year, Enbridge chief executive officer Al Monaco said that once Norlite is completed, it will link to its Southern Lights pipeline – which carries diluent from Illinois to Edmonton – and "we will have built a diluent path all the way from Chicago to the heart of the oil sands."

Following regulatory and environmental approvals, Enbridge anticipates that construction on Norlite could begin as early as the summer of 2015, with an in-service date in 2017. The system could access existing capacity on Keyera's pipelines in the Edmonton area, avoiding some construction costs. In recent months, Keyera's executive team had spoke openly about its intention to participate as a 30-per-cent non-operating owner of the pipeline. On Tuesday, the deal was confirmed.

"The Norlite pipeline enhances Keyera's integrated service offering, enables us to participate in a long-haul pipeline transportation system and provides us with an opportunity to offer complementary diluent-handling services such as storage and rail off loading," David Smith, president and chief operating officer of Keyera, said in a news release.

When Enbridge first announced the pipeline last October, it said the associated capital cost could go as high as $1.4-billion, depending on scope, to meet the needs of multiple producers in the oil sands region. On Tuesday, Keyera said Enbridge anticipates finalizing the estimated capital cost later this year.

The pipeline is already anchored by commitments from the Fort Hills project partners: Suncor Energy Inc., Total E&P Canada Ltd. and Teck Resources Ltd.

"We are pleased to have Keyera as an owner in the pipeline and for Norlite to gain access to Keyera's diluent system," said Enbridge spokesman Graham White. "The Keyera system connectivity provides extensive access to Edmonton-area diluent sources, which will benefit all Norlite shippers."