Pembina sells KAPS pipeline share, plans Nipisi heavy crude restart

Pembina Pipeline Corp. affiliate Pembina Gas Infrastructure (PGI) has agreed to sell its 50% interest in the Key Access Pipeline System (KAPS) under development in northwest Alberta to Stonepeak Partners LP. Stonepeak expects the $662.5-million acquisition to close first-quarter 2023. Keyera Corp. will continue to own the remaining 50% of KAPS and operate the system.

KAPS will collect condensate and NGL in the Montney and Duvernay shale regions of Alberta and bring it to liquids processing and storage at Fort Saskatchewan. The 560-km dual pipeline system, currently under construction, will use 16-in. OD pipe for condensate and 12-in. OD pipe for NGL mix. The Government of Alberta expects KAPS to be complete in 2023.

PGI is owned 60% by Pembina and 40% by Kohlberg Kravis Roberts (KKR) & Co. Inc.’s global infrastructure funds. Under the agreement, PGI will continue to fund its share of the project costs under current project scope until end-2023. Current project scope aligns with the capital cost estimate of $1 billion, net to PGI, most recently disclosed by Keyera.

Pembina also intends to reactivate the 190-km, 100,000-b/d Nipisi Pipeline heavy crude system by third-quarter 2023 to serve customers in the growing Clearwater oil play. The company reported being in late-stage discussions with a customer regarding a long-term contractual commitment for firm service and expects to finalize the agreement by end 2022. Discussions are underway with other customers regarding additional long-term commitments. Nipisi was built to move diluted heavy oil from north of Slave Lake, Alta., to an existing Pembina trunkline south of Swan Hill for further shipment to Edmonton.

Tamarack Valley Energy Ltd. earlier this year agreed to acquire Rolling Hills Energy Ltd., a privately held pure play Clearwater oil producer, and expected to begin initial exploration there over the course of the year (OGJ Online, Apr. 21, 2022).

Pembina is also continuing pre-sanctioning development of a new 55,000-b/d propane-plus fractionator at its 210,000-b/d Redwater complex. Existing infrastructure at Redwater includes storage caverns and unit-train capable rail. Pembina reported signing commercial agreements with three northeast British Columbia producers to underpin the new fractionation and expects to take final investment decision first-quarter 2023.