Nipisi heavy crude and Mitsue condensate pipeline systems. (Dotted green.) Source: Pembina. Click to enlarge.

The Nipisi Pipeline is a new, 190 kilometer heavy oil pipeline with a design capacity of 100,000 barrels per day (bpd) that will transport diluted heavy oil from north of Slave Lake to Pembina’s existing pipeline south of Swan Hills and on to Edmonton, Alberta for further transport or processing.

The Mitsue Pipeline will transport condensate from various sources in north western Alberta to heavy oil producers operating north of Slave Lake, Alberta for use by producers to dilute heavy oil prior to transport. The pipeline consists of a combination of 135 km of new and 120 km of existing infrastructure, and has a design capacity of 22,000 bpd.

The Nipisi and Mitsue Pipelines are underpinned by long-term agreements which contain a minimum primary term of 10 years from the in-service date and are extendible thereafter. Pembina expects these pipelines to contribute stable, long-term cash flow, with full recovery of operating expenses.

Pembina estimates that the total capital cost of the Nipisi and Mitsue Pipelines will be approximately C$400 million, down from Pembina’s previous estimate of C$440 million. The Nipisi and Mitsue Pipelines are expected to contribute annual operating margin of approximately C$40 million once commissioning has been completed.

Pembina has designed the Nipisi and Mitsue Pipelines so the capacity of each pipeline can be increased in a staged approach. The Nipisi Pipeline has the potential to be expanded to 200,000 bpd and the Mitsue Pipeline could be expanded to 45,000 bpd. Expansion plans would require regulatory approval, which Pembina expects to pursue once customer support has been solidified.

The Mitsue Pipeline commenced operations in mid-June, ahead of schedule, and the Nipisi Pipeline initiated deliveries in early July. Commissioning and ramp-up on the Nipisi Pipeline is continuing and is expected to be completed early in the fourth quarter of 2011.

Pembina transports crude oil and natural gas liquids produced in Western Canada, owns and operates oil sands pipelines and has a growing presence in midstream and gas services.