Rising prices and producer demand for delivery service in the gassy Montney Shale of northern Alberta and British Columbia (BC) ignited a “tremendous start” to the year for Pembina Pipeline Corp., management said. 

alliance price graph

The Calgary operator, which reports in Canadian dollars (C$1.00/US 80 cents) said highlights of the first quarter included relaunching construction of the $530 million, 150-kilometer (90 miles) Phase VIII Peace Pipeline Expansion.

The project, which had been deferred, would add capacity to transport 235,000 b/d of Montney natural gas liquids (NGL) by early 2024, said the Calgary firm.

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On the Alliance natural gas pipeline, Pembina said more than 90% of capacity is contracted for the current gas year, with 75% contracted for the next gas year. 

Alliance supplies gas from the Western Canadian Sedimentary Basin and the Williston Basin to Chicago.

“Recent contracting success continues to highlight the value of Alliance’s reliable and highly competitive access to Midwestern U.S. gas markets, and as a conduit to the Gulf Coast and its robust liquefied natural gas market,” management said. 

In addition to an announced 20-year midstream services deal with ConocoPhillips Canada for transportation and fractionation of NGLs, Pembina highlighted a recent take-or-pay offtake agreement with a second producer in northeastern BC (NEBC).

“The agreement provides the producer with certainty of transportation egress from this key area for their future development and access to the remainder of Pembina’s integrated value chain,” management said.

Commercial terms have also been reached with a third Montney producer regarding “significant” long-term NEBC volume commitments, with final signatures expected by mid-2022.

“These agreements are exciting opportunities to further strengthen Pembina’s relationship with premier NEBC producers in a strategically important region,” said COO Jaret Sprott. “They highlight Pembina’s advantages in the face of increasing competition for Montney volumes and demonstrate the value our customers continue to place on our already in-place assets, strong track record of safety and reliability, competitive fees and integrated service offering.”

Because of its long-term commitments, said management, “Pembina expects to have secured the transportation rights to a significant portion of forecasted future growth in the northeast BC Montney.”

Pembina also highlighted the recent submission of an Environmental Assessment Certificate for the Cedar LNG floating liquefied natural gas export project. This moves the project into the 180-day application review phase.  

Pembina reported profits of $481 million (81 cents/share) in 1Q2022, up from $320 million (51 cents) in the first quarter of 2021.

As oil, gas and byproduct prices increased, the pipeline and processing firm’s marketing crew posted a 220% increase in before-tax earnings to $221 million for the first quarter.

Higher natural gas liquids margins resulted “when seasonable inventories built up during the second and third quarters of 2021 were sold during the first quarter of 2022 in a higher price environment,” management said. “In addition, crude oil marketing realized strong blending margins due to the rapidly rising crude oil price environment.”

Andrew Baker contributed to this story.