Enbridge signs Husky deal
Sunrise Project Next In Line; Project raises investments in oilsands to $2.3B
By Shaun Polczer, Calgary Herald September 8, 2010
CALGARY -- Enbridge Inc. on Tuesday continued to redouble its oilsands expansion plans with a deal to tie Husky Energy's proposed Sunrise oilsands project to its Cheecham distribution hub in northeast Alberta.
The Calgary-based shipper said it had signed a $475-million deal with Husky to build and operate the facilities which will initially ship 90,000 barrels per day to its transportation hub near Conklin starting in 2013.
Eventually the pipeline will be capable of transporting 270,000 bpd to the hub, which will then be distributed to refi neries in the United States.
The deal, which is similar to arrangements struck with Suncor and Cenovus earlier this summer, will bring Enbridge's investments in its regional oilsands gathering network to $2.3 billion, the company said.
"This string of investments reflects our strategy to capitalize on regional pipeline and terminaling opportunities and further solidifies our competitive position as the largest pipeline operator in this oilsands region," CEO Pat Daniel said in a statement.
The deal is the latest sign that Husky will officially give the Sunrise project the green light when it goes for board sanction later this year. Sunrise, a joint production and reining venture with BP, uses steam technology to loosen bitumen deposits too deep to mine and pumps the oil to the surface using specially designed horizontal wells.
BP will contribute a pair of refineries in the U.S. to the venture, while Husky will supply bitumen to feed them.
Earlier this year Husky said cost estimates for Sunrise fell more than 25 per cent to $2.5 billion. Assuming it is approved, the first 60,000 bpd phase is expected to come onstream in 2014 and will reach a peak design rate of 200,000 bpd by 2020.
Husky spokesman Graham White wouldn't comment on financial terms but said Sunrise is still expected to go before the company's board of directors.
"As far as sanctioning, it's on schedule. We're expecting it before the end of the year," he said. "It (the Enbridge deal) is something that contributes to that certainty," the project will be approved.
In other news, Enbridge rival TransCanada Corp. said it expects to restart the half-million barrel per day Keystone pipeline from Hardisty, Alta. to Wood River, Ill., today after it was taken down last week for unplanned maintenance. The company still expects to meet its September delivery schedules, company spokesman Terry Cunha said.
"It doesn't impact anything," Cunha said. "We'll still be able to get the crude where it needed to be when it needed to be there."
TransCanada on Tuesday also announced plans for an open season to support a $70-million project to ship 150,000 bpd from Cushing, Okla. to the U.S. Gulf Coast as part of its Keystone expansion. An open season is a solicitation for binding commitments to build the line.
Following the completion of the contracting, TransCanada said it intends to proceed with the necessary regulatory approvals to construct and operate the required facilities to begin deliveries starting in the first quarter of 2013.
Enbridge, meanwhile, is still waiting for approval to restart Line 6b in southern Michigan, which has been out of service since late July after a leak that spilled 19,500 barrels into the Kalamazoo River.
Enbridge completed pressure testing the line last week and is awaiting the green light to resume 190,000 barrels per day of oil deliveries, spokeswoman Jennifer Varey said in an e-mail.
"As per last week's update, we're still waiting to hear from the office of pipeline safety of PHMSA (Pipeline and Hazardous Materials Safety Administration)," she said.
Enbridge shares rose 34 cents on the Toronto Stock Exchange Tuesday, to close at $53.49 while TransCanada rose 28 cents to finish the day at $38.52.
spolczer@theherald.canwest.com
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