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As outlined in 2012, Inter Pipeline is advancing several major expansion projects within its oil sands pipeline business segment. Nearly $1.4 billion will be directed towards new oil sands transportation infrastructure in 2013. Growth capital expenditures in other business segments include approximately
$30 million in the NGL extraction business, $20 million in bulk liquid storage and $10 million in conventional oil pipelines. Consistent with last year, Inter Pipeline expects to spend $40 million on
sustaining capital projects.
Organic Growth Capital
2012 Forecast
Oil Sands Transportation* $1,390 $262
NGL Extraction* 30 29
Bulk Liquid Storage 20 16
Conventional Oil Pipelines 1033
Total Organic Growth Capital
Danish Terminal Acquisition
1,450
-
340
459
Sustaining Capital 4040
Total Capital $1,490$839
* Includes Inter Pipeline's 85% ownership interest in the Cold Lake pipeline system or 50% interest in the Empress V NGL extraction facility
Oil Sands Transportation
Capital spending in 2013 will be dominated by expenditures related to Inter Pipeline's integrated expansion program on the Cold Lake and Polaris pipeline systems. This major expansion program involves the provision of approximately
850,000 barrels per day ("b/d") of committed bitumen blend and diluent delivery capacity for three oil sands projects operated by the FCCL Partnership, a business
venture between Cenovus Energy and ConocoPhillips. Total capital expenditures
are expected to be $2.2 billion over the next 3 years, of which $1.1 billion will be incurred in 2013.
The integrated expansion program will involve the construction of 840 kilometres of pipeline and seven mainline pump stations. New facilities will enter commercial service in phases commencing in 2014. As discrete construction projects are completed, Inter Pipeline will begin generating fixed annual payments under high quality ship-or-pay contracts with the FCCL Partnership. Definitive transportation agreements are expected to be executed in the first quarter of 2013.
During 2013, roughly $40 million will be invested to complete the installation of two
quarter-point stations and existing station upgrades on the west leg of the Cold Lake pipeline system. This mainline expansion project will increase bitumen blend capacity from 535,000 b/d to 650,000 b/d and is expected to be operational in mid
2013.
On the Polaris system, Inter Pipeline will spend roughly $16 million to complete new diluent delivery connections to Suncor's Athabasca oil sands operations and the Sunrise project operated by Husky.
Inter Pipeline's current oil sands development programs will result in surplus capacity which will be available for future business. In 2013, Inter Pipeline plans to spend $170 million to provide transportation service to a third party. This amount has been backstopped through a capital funding arrangement, with no resulting financial exposure to Inter Pipeline.
Remaining growth capital will be spent on various efficiency improvement projects at the Cochrane and Empress NGL extraction facilities.
Bulk Liquid Storage
Inter Pipeline expects to spend approximately $20 million on organic growth capital projects in the bulk liquid storage segment in 2013. Roughly half of this amount will be incurred at Simon Storage terminals in the United Kingdom and Germany, with remaining expenditures incurred within the Inter Terminals subsidiary in Denmark.
In the United Kingdom and Germany, approximately $10 million will be incurred on tank refurbishments, equipment upgrade projects and new fuel additive facilities. In Denmark, approximately $9 million will be incurred to acquire an additional fuel oil storage tank from DONG Energy at the Ensted terminal. Approximately $1 million will be invested in new product blending equipment to enhance services available to storage customers.
In the conventional oil pipelines segment, approximately $10 million will be spent to enhance oil handling and transportation facilities on the Bow River, Central Alberta and Mid Saskatchewan pipeline systems. Various new battery connection, facility upgrade, rail access and storage projects are planned in 2013.
Inter Pipeline's conventional oil gathering systems continue to benefit from increased drilling activity and the application of new well completion technologies.
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