Pembina Advances Horizon Pipeline Construction
Pembina Pipeline Corporation (Pembina), a wholly owned subsidiary of Pembina Pipeline Income Fund, has executed definitive agreements with Canadian Natural Resources Limited for the Horizon Pipeline. The deal calls on Pembina to provide dedicated pipeline transportation service of up to 250,000 barrels per day of synthetic crude oil to Canadian Natural's Horizon Oil Sands Project over an extendible 25-year term commencing on the in-service date.
Pembina will construct the Horizon Pipeline and related facilities over three construction phases, the first of which will commence in November 2006. The twinning of Pembina's Alberta Oil Sands Pipeline (AOSPL) system will be substantially completed during this first construction phase with the installation of approximately 129 kilometers of 24-inch and 30-inch diameter pipeline. Preliminary activities are currently underway in advance of the second and final phases of construction, scheduled over the summer 2007 and winter 2007/2008 construction seasons, which will entail the installation of 73 kilometers of 20-inch pipeline connecting the Horizon Project to the AOSPL terminal. Commissioning is scheduled for mid-2008 and the pipeline will be available for service on July 1, 2008.
The total cost of the Horizon Pipeline is estimated at $338 million. Pembina has worked closely with its customer in the development of this project and has employed a proactive contracting and procurement strategy to achieve a high degree of cost and scheduling certainty. Pembina has secured contracts for all major elements of the project and has acquired the pipe required to complete all three construction phases. Glen Fyfe, Pembina's Horizon Pipeline Project Manager, commented, "Pembina has effectively mitigated many of the challenges associated with managing a project in a heated industry environment by successfully executing its proactive contracting, procurement and expediting strategy. We expect to complete this project on time and on budget. The recent $165 million expansion of our AOSPL system, which was completed below initial cost estimates and ahead of schedule, gives us further confidence in our ability to deliver for our customers."
Canadian Natural will have exclusive use of the Horizon Pipeline and Pembina has agreed to the commercial terms required to construct expansions or extensions to the pipeline. The contracted revenue requirement includes provision for a fixed rate of return on invested capital and full recovery of operating costs, and is expected to provide roughly ten percent accretion to Pembina's current level of distributed cash flow making this a very attractive undertaking for both Pembina and its owners. Further, by leveraging its existing oil sands infrastructure to provide this new service, Pembina is able to offer Canadian Natural dedicated pipeline transportation service at a competitive rate.
The Horizon Pipeline represents an important step forward in Pembina's overall corporate strategy, establishing Pembina's presence in the oil sands infrastructure sector with 640,000 barrels per day of synthetic crude oil transportation capacity from the region and positioning the company for further growth in this key development area. Bob Michaleski, Pembina's President and CEO, stated, "the Horizon Pipeline reflects the future for Pembina. In addition to tremendous growth in our conventional and midstream business units, our oil sands unit continues to flourish and, with abundant future development opportunities associated with the ongoing rapid development of this important resource, we expect the cash flow contribution from this business unit to continue to expand."
Pembina Pipeline Income Fund is among the leading issuers in the Canadian energy infrastructure trust sector. Pembina's extensive network of conventional liquids feeder pipelines, and growing presence in the oil sands and midstream sectors, provide an integral service to the western Canadian energy industry. This balanced portfolio of premium, long-life energy infrastructure assets supports the stability and sustainability of the Fund.
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