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Calgary's Pembina Expands NGL Role With Two Deals

Calgary-based Pembina Pipeline Corp. reached out Tuesday for an expanded role in the natural gas liquids (NGL) trade between Canada, the United States and overseas markets with a US$1.15 billion package of deals.

On the import side, Pembina committed US$650 million to take over Vantage Pipeline, which makes northwest-bound deliveries of 40,000 b/d of ethane to Alberta from the Bakken Shale oil field in North Dakota. On the export side, Pembina signed an agreement with the Port of Portland for an Oregon site for a 37,000 b/d propane terminal forecast to cost US$500 million to build and start loading up ships by 2018.

In a statement announcing the Vantage takeover, Pembina President Mick Dilger called the acquisition a "low-risk, logical step-out" from the firm's roots in Alberta shipping and processing "into one of the most promising hydrocarbon plays in North America."

Hess Corp. and private Calgary company Mistral Energy Inc. built Vantage to fulfill an ethane supply agreement with Nova Chemicals, which operates Alberta petrochemical plants that use the gas byproduct as their raw material.

Canada's National Energy Board approved the Canadian portion of the pipeline in 2012 based on projections that a shortfall in Alberta ethane supplies could grow from 32,000 b/d to more than 70,000 b/d (see Shale Daily, June 25, 2012). A year later, the Obama administration issued a presidential permit for an 80-mile U.S. pipeline link in North Dakota (see Shale Daily, July 22, 2013).

Pembina said its agenda includes eventually increasing deliveries on the 700-kilometer (430-mile) Vantage route to its full built-in capacity for 60,000 b/d, a 50% jump that can be done for "modest" cost by adding pumping power to the pipeline.

The acquisition includes a side deal for Pembina to take over a processing site that Mistral is building in a southeastern Saskatchewan extension of the Bakken oil field, for forecast gas-liquids production of 4,500 b/d. The takeover will be paid for with US$395 million in cash and US$255 million in Pembina common shares.

The Oregon export terminal agreement gives Pembina a site for a West Coast propane terminal that already has a marine berth for ships in the city of Portland. The deal fires the starting gun on courting support and regulatory approvals from municipal, state, federal and community agencies, said the Calgary firm.

Dilger called the site agreement "a tremendous milestone" for the propane project and set a target date of 2018 for starting export shipments. The planned cargo loadings of 37,000 b/d are described as only an "initial" start into the tanker trade. Pembina intends to import the product from western Canadian fields for re-export overseas, the company said.

Port of Portland Executive Director Bill Wyatt called the project "an excellent fit" into a relationship that already includes traffic with Canada in other materials. "Our port is a proven gateway for Canadian exports and imports."

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