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Pembina places CAN$2.8 billion of integrated capital projects into service

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World Pipelines,

Pembina Pipeline Corporation (Pembina) announced that it has placed approximately CAN$2.8 billion of integrated capital projects into service, including its Phase III pipeline expansion (Phase III Expansion) and two connected major delivery points: the company's third fractionator at Redwater (RFS III) and its Canadian Diluent Hub (CDH).

"At the outset of these projects, we committed to constructing large-scale, multiyear build assets on time and on budget, and I'm proud to say that we've successfully delivered on that promise, with the overall portfolio coming in under budget by approximately 8% and either on time or ahead of schedule," said Mick Dilger, Pembina's President and Chief Executive Officer.

Phase III Expansion

The Phase III Expansion, which is underpinned by long-term contracts with take-or-pay commitments, was placed into service on 30 June 2017 on time and under budget from the CAN$2.44 billion expected capital. The entire Phase III Expansion programme, which was initiated in 2013, included installing over 900 km of new pipeline primarily along the company's existing Peace and Northern system rights-of-way, as well as upgrading and adding new mainline pump stations. Initial work for the Phase III Expansion included debottlenecking segments of existing pipeline systems from Taylor (British Columbia) to Gordondale (Alberta) and adding a new pipeline from Wapiti to Fox Creek (Alberta) to accommodate increased volumes upstream of Pembina's Fox Creek tie-in point. In support of handling the increased product, 420 000 bpd of incremental capacity was added in the Fox Creek to Namao corridor of Alberta through the construction of two pipelines: a 16 in. dia. and a 24 in. dia. pipeline, each spanning approximately 290 km.

With the Phase III Expansion now complete, Pembina has four pipelines between Fox Creek and Namao, allowing the company to transport four distinct hydrocarbons – ethane-plus, propane-plus, condensate and crude oil – each in its own segregated pipeline, plus upstream capacity to handle higher volumes driven by the development of the Montney, Duvernay and Deep Basin resource plays.

"Placing our Phase III Expansion into service is an exciting milestone for Pembina as we've now successfully completed the largest capital project in our history," said Paul Murphy, Pembina's Senior Vice President, Pipeline and Crude Oil Facilities. "Our customers will benefit from the newly increased capacity, as our pipelines were previously under apportionment, and they will also realise enhanced service offerings and operational efficiencies from being able to flow segregated product in separate pipelines. In addition, we will be able to provide a ratable flow of ethane-plus and propane-plus into both Pembina and third party fractionators in the Fort Saskatchewan region, which will help to optimise operations at these facilities."

In aggregate, Pembina now has over 850 000 bpd of combined capacity between its Peace and Northern pipeline systems which connect into the delivery point at Namao. Given continued customer demand, the company recently announced that it secured contracts to add an additional 180 000 bpd of capacity via the addition of two pump stations on the new 24 in. pipeline between Fox Creek and Namao through its Phase IV Expansion, subject to regulatory and environmental approval. It also is working on the Phase V Expansion, which entails looping its pipeline between Lator and Fox Creek to provide additional upstream capacity. Beyond these expansions, which are expected to be placed into service in late 2018, Pembina is able to increase capacity on the 24 and 16 in. pipelines in the Fox Creek to Namao corridor by another 250 000 bpd through additional pump stations – which would bring total capacity into the Namao hub to almost 1 300 000 bpd.


In conjunction with the Phase III Expansion, RFS III was also placed into service on 30 June 2017, ahead of schedule and under budget. Backstopped by long-term, take or pay contracts, RFS III added 55 000 bpd of additional propane-plus fractionation capacity and leveraged the designs of Pembina's first and second fractionators. Pembina's Redwater complex now has an aggregate fractionation capacity of approximately 210 000 bpd – the largest in the Canadian energy infrastructure sector.

"Based on our customers' volume projections supporting the Phase III Expansion, we secured contracts to build RFS III so that pipeline and fractionation capacity would be better aligned within the Fort Saskatchewan area," said Stuart Taylor, Pembina's Senior Vice President, NGL and Natural Gas Facilities. "Along with increased fractionation capacity with RFS III, our Redwater complex provides customers with efficient storage and market access through our well-established facilities at Redwater and our new Canadian Diluent Hub."

Taylor concluded: "Looking ahead, we are focused on providing market access solutions for our customers for the products coming off the back end of our fractionators – particularly propane – which will ultimately help add value to the incremental barrels and serve to increase producer netbacks. In support of this, we are working to further expand our service offering down the value chain by proposing to develop both an integrated propylene and polypropylene production facility and a west coast liquefied petroleum gas export terminal.”


Also aligned with the in-service of the Phase III Expansion and RFS III, on 30 June 2017, Pembina placed additional condensate connections at CDH into service on time and under budget. CDH, which operates commercially as a fee-based hub, provides direct connectivity for growing condensate volumes transported on Pembina's pipeline systems and offers diluent services for oil sands customers. Currently, the facility's pipelines are capable of delivering approximately 400 000 bpd of condensate to regional third party diluent pipelines, with connections to the Access, Cold Lake, Fort Saskatchewan (FSPL) and Polaris pipelines. By the end of 2017, CDH is also expected to have additional third party connections as well as 500 000 bbls of aboveground storage in operation.

"The Canadian Diluent Hub was driven by the development of the Montney and Duvernay resource plays in our service areas," said Murphy. "Increasing production from these plays fueled infrastructure development, such as our Phase III Expansion and RFS III. With our access to growing condensate supply through our existing and new infrastructure, customers were supportive of us expanding diluent market access and service offerings."

Several additional factors supported the development of CDH, including its Alberta Industrial Heartland location, which is proximal to oil sands and diluent pipelines, as well as associated terminals. Development in this location enabled Pembina to avoid costly and congested construction in the greater Edmonton area. Further, given Pembina had reached its maximum capacity into the existing Edmonton-area condensate infrastructure, the Company foresaw that additional infrastructure would be required to accommodate higher volumes. Through CDH, Pembina now offers incremental solutions for its customers by expanding on the condensate services the Company already provides.


"Looking back only a few years ago when our extensive growth plans were in their infancy, to the transformation of where our company is today, I commend all of the hard work and dedication of our teams who worked tirelessly to achieve such extraordinary results in bringing our growth plans successfully into fruition – all while maintaining our outstanding safety record," commented Dilger. "I am also very proud of the relationships and trust we have built over this timeframe with the communities, stakeholders, customers and First Nations and Métis in the areas where we operate and look forward to continuing to foster these relationships in the future."

"Now through 2018 – including growth projects of Veresen, pending successful close of the transaction we announced in May this year – we will be placing an additional CAN$3 billion of assets into service on top of the CAN$2.8 billion we announced in service today," said Dilger. "These projects, with their low risk, fee for service cash flows, will contribute significantly to our projected adjusted EBITDA for the full year of 2018 between CAN$2.55 and CAN$2.75 billion."

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