Enbridge signs agreement with Husky for Sunrise facilities

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Sept. 10 -- Enbridge Inc. has entered into an agreement to provide pipeline and terminaling services to the proposed Husky Energy-operated Sunrise Oil Sands Project.

The Sunrise project is part of a 50-50 joint-venture of Husky and BP PLC, which links the Canadian company's oil sands production with the British firm’s US refineries. Sunrise has estimated total probable and possible reserves of 3.7 billion bbl.

The agreement marks the eighth to be included in Enbridge's oil sands transportation system by 2013, and is the third to be announced by the firm in the past few weeks.

Enbridge said it will construct three main facilities: an originating terminal at the Sunrise Project, a 112-km, 24-in. pipeline from Hartley to Enbridge's Cheecham terminal, and additional tankage at Cheecham.

The estimated cost of the project is $475 million. Initial capacity will be 90,000 b/d, expandable to 270,000 b/d. The facilities are expected to be in service in the latter half of 2013.

Under the agreement, Enbridge also will provide pipeline transportation services on its existing Regional Oil Sands System for up to 90,000 b/d of diluted bitumen produced from Phase 1 of the Sunrise Project.

The initial term of the pipeline and terminaling agreement is 20 years with Husky having the right to extend the agreement in successive 5-year terms for a total contract life of 45 years.

Enbridge and Husky will share equally in net revenues from third party volumes transported in the line.

“The Sunrise commercial arrangements are similar to those recently concluded with both Suncor and the Christina Lake project in that Enbridge will benefit from an attractive investment in new facilities and from increased volumes on existing facilities,” said Chief Executive Officer Patrick Daniel.

Enbridge recently announced it would undertake a $185 million expansion of its Athabasca Pipeline to accommodate recent shipping commitments by the Christina Lake oil sands project operated by Cenovus.

In August, Enbridge announced that it entered into an agreement with Suncor Energy to construct a 95-km, 30-in. oil pipeline.

It said the line would connect the Enbridge Athabasca terminal, which is adjacent to Suncor's oil sands plant, to the Cheecham terminal, which is the origin point of Enbridge's Waupisoo Pipeline.

Enbridge said the pipeline will parallel Enbridge's existing Athabasca Pipeline between the Athabasca and Cheecham terminals.

Suncor's existing commitments on the Athabasca Pipeline will remain in place, and that the new line is expected to be in service by mid-2013, pending regulatory approval.

Over the past year, Enbridge has announced $2.3 billion in expansions and extensions to its regional oil sands system.

Analyst BMI noted, “Enbridge's deal with Husky is further confirmation of the return of investment appetite in Canada's oil sands projects. In light of regulatory risks to US offshore production, Canadian oil production assets remain attractive.”

Contact Eric Watkins at hippalus@yahoo.com.

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