Stockwatch – Canadian energy infrastructure company Inter Pipeline Ltd (TSE:IPL, Mkt cap 10.52B, P/E – , Div/yield 0.11/3.95, EPS -0.22, Shares 322.13M) has unveiled plans to invest $100 million in the expansion of its Mid-Saskatchewan oil lines with the aim of adding 95,000 barrels per day of new capacity.
The company, which operates regional pipeline systems in Western Canada, said it has sealed contracts with five oil producers that have agreed to ship oil on the lines for between four and ten years.
As part of the expansion project, Inter Pipeline will add 90 kilometres (56 miles) of new lines to its Saskatchewan system, including 50 kilometres of new mainline pipe and 40 kilometres of pipeline laterals, and related pumping and metering facilities. The first phase of the project is expected to become operational later this year and to be fully completed by the second quarter of 2015. Initially, the new mainlines will operate at less than 50% of capacity. This will be gradually increased as oil production rises.
Oil production in Saskatchewan has been growing at a rapid pace owing to an increase in drilling activity and the use of innovative well completion technologies in the area. Over the last two years, throughput volumes have doubled to more than 70,000 barrels per day and much of the Mid-Saskatchewan oil system has been operating at or near full capacity, Inter Pipeline said.
Inter Pipeline expects the project to fetch between $25 million and $30 million in incremental EBITDA a year.
The investment is Inter Pipeline’s most significant expansion of a conventional oil pipeline system, the company’s president and chief executive Christian Bayle commented. The expansion will help provide an efficient transportation solution for customers and flexibility to ensure growth in the future, he said.
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