Cold Lake Pipeline to Transport New Oil Sands Product

Inter Pipeline Fund announced that a commercial agreement has been signed with three shippers on the Cold Lake pipeline to create delivery service for a new oil sands blend product. The Cold Lake Pipeline Limited Partnership will invest approximately $16 million in new facilities to allow shipment of up to 60,000 barrels per day of a new oil product known as DilSynBit blend.

The agreement, signed with Imperial Oil Limited, EnCana Corporation and Canadian Natural Resources Ltd., provides for a structured return on capital invested in new facilities and the recovery of operating costs over an initial 20 year contract term.

Inter Pipeline Fund owns 85% of the Cold Lake Pipeline Limited Partnership and is operator of the system.

Cold Lake Growth Opportunity
"The introduction of DilSynBit blend service later this year will strongly support the future growth and development of the Cold Lake system," commented David W. Fesyk, President and Chief Executive Officer. "We are very pleased that our senior producers have decided to market a second blended product stream on the Cold Lake system."

At present, the Cold Lake pipeline transports a single oil blend consisting of heavy Cold Lake bitumen and light conventional condensate. The new DilSynBit blend stream will include light synthetic oil as a blending component to dilute the heavy, tar-like, Cold Lake bitumen. Synthetic oil, the primary upgraded product from the Athabasca oil sands, will be sourced at Edmonton for delivery to the La Corey terminal on the Cold Lake system.

DilSynBit Blend Facilities
The DilSynBit project will involve construction of two 80,000 barrel storage tanks, pumping facilities and metering equipment on the Cold Lake system. Regulatory approvals have been obtained and construction activity is currently underway.

Total capital costs are estimated at $16.1 million, of which $13.7 million will be funded by Inter Pipeline Fund, representing its 85% interest in the project.

DilSynBit blend service is expected to commence during the fourth quarter of 2004.

Higher Cold Lake Volumes
The introduction of DilSynBit blend service will result in higher throughput volumes on the Cold Lake system. This is because synthetic oil has a higher density and is more viscous than the conventional light condensate that currently is blended with Cold Lake bitumen. Accordingly, a blended barrel of Cold Lake bitumen requires more synthetic oil than conventional condensate to meet pipeline density and viscosity specifications.

At a delivery rate of 60,000 barrels per day of DilSynBit blend, the Cold Lake system will realize approximately 10,000 barrels per day of additional throughput volume. This is due to the higher blending ratio associated with synthetic oil.

Cash Flow Contribution
Inter Pipeline Fund will earn a structured return on its investment in the new DilSynBit facilities. Upon commencement of service, Inter Pipeline expects to receive approximately $2 million in service fees annually from DilSynBit shippers. Related cash flow will remain stable over the 20-year life of the project.

Cold Lake Outlook
Volumes on the Cold Lake Pipeline increased significantly during 2003. Throughput volumes in 2003 averaged approximately 246,000 barrels per day, representing a 16% increase compared to the prior year.

Recent shipper forecasts suggest continued production growth in the Cold Lake Oil Sands region. Higher bitumen production, combined with the introduction of DilSynBit service, could result in fourth quarter 2004 delivery rates that exceed minimum shipping commitments on the Cold Lake system. Under the existing transportation service agreement, Cold Lake shippers have throughput commitments totaling 322,000 barrels per day in 2004.