Consistency is key in the pipeline business and for one Calgary-based company, bettering consistency means securing funding for a new project.
A 10 percent volume increase in conventional oil transportation was amongst the positive numbers outlined by Pembina Pipeline Corporation, or Pembina, in the company’s Management Discussion and Analysis. The company released the document in November of last year.
Pembina Pipeline MD&A (Text)
Conventional oil refers to petroleum, or crude oil, which is pumped to the ground surface as a liquid, then processed to remove contaminants and transformed into products we consume, such as gasoline.
According to the document, Pembina transports half of the conventional crude oil in Alberta. The company has been in operation for 60 years.
The volume of crude oil transported increased from 443,900 barrels per day in the third quarter of 2012 to 489,100 barrels per day in the same quarter of 2013.
The increase means more good news for Pembina, who reported an incredibly strong year in 2012 after acquiring Provident Energy Ltd.
2013 followed suit with Pembina announcing that the company had gained commercial support to construct a $2 billion pipeline expansion that would add 540 kilometres of pipeline between British Columbia and Alberta.
The project will add new pipeline to existing pipeline structures owned by the company. The new expansion is expected to take two to three years to build.
The segment of the company’s existing pipeline system that will experience the most expansion under the project is located at Fox Creek, a town approximately 250 kilometres northwest of Edmonton.
In a recent news release, Pembina says that post-construction, the company will have three pipelines between Fox Creek and the provincial capital city.
Haskayne School of Business professor Bob Schulz says that for pipelines, the numbers should be consistent quarter to quarter, year to year. He says that the fact Pembina’s numbers are up from 2012 is a good sign.
The announcement of the new pipeline project is a logical move for Pembina, given the company’s strong financial standing, Schulz says.
“So you get the cash, the regulatory approval, then you get the pipe in the ground and three years later you start counting the money,” he says, with reference to the increase in revenue that will be generated by the new pipeline.
Before they can start counting the money, Pembina must sign a 10-year contact and obtain environmental and regulatory approval. After the company receives the approval, the project can proceed to the construction stage.
“An automobile dealer has to sell cars every year,” Schulz says with reference to the 10-year contract. “At Pembina, they just need to move the products around the pipeline.”
According to Schulz, the future is bright for Pembina. If the price of oil remains steady, Schulz says he anticipates the company will experience a substantial jump in revenue due to the additional 320,000 barrels per day transported by the new pipeline.
The transported volume of oil projected to be moving through the pipeline in the next few years, in addition to the product already being moved by existing pipelines, will mean good business for Pembina in the years ahead, says Schulz.
The projected dates of completion for the pipeline expansion are 2015 or 2016.
Pembina will release the company’s fourth quarter results and annual report on February 26.