Pembina Pipeline Corp. earned $314 million first-quarter 2020, in line with the same period a year earlier. First-quarter earnings were positively impacted by higher gross profit from additional assets following the acquisition of Kinder Morgan Canada and the US portion of the Cochin pipeline combined with consistent performance from Pembina's other assets. Marketing and new ventures was negatively impacted by lower margins on crude oil and NGL sales during the quarter, offset by higher unrealized gains on commodity-related derivatives due to decreasing forward prices for crude oil and NGL compared to contract positions.
Pembina's placed both its Northeast British Columbia (NEBC) Montney infrastructure and Wapiti condensate lateral into service during the quarter. The company continues to progress its Phase VI Peace Pipeline Expansion, which includes upgrades at Gordondale, a 16-in. OD pipeline in the La Glace to Wapiti corridor and associated pump station and terminal upgrades, and a 20-in. OD pipeline in the Kakwa to Lator corridor. The La Glace to Wapiti segment was placed into service during the quarter. The Kakwa to Lator segment is under construction and will be placed into service second- quarter 2020. The project has a capital budget of $280 million.
In response to the COVID-19 pandemic, the resulting virtual shutdown of the global economy and the recent decline in global energy prices, Pembina made the decision to defer some projects:
- The Phase VII Peace Pipeline Expansion, which includes a 20-in. OD, 220-km pipeline in the La Glace-Valleyview-Fox Creek corridor, as well as six new pump stations or terminal upgrades between La Glace and Edmonton, Alta. This expansion is expected to add 240,000 b/d of incremental capacity upstream of Fox Creek, accessing capacity available on the pipelines downstream of Fox Creek.
- The Phase VIII Peace Pipeline Expansion, which includes 10- and 16-in. OD pipelines in the Gordondale to La Glace corridor, as well as six new pump stations or terminal upgrades located between Gordondale and Fox Creek.
- The Phase IX Peace Pipeline Expansion, which will include 6- and 16-in. OD pipelines debottlenecking the corridor north of Gordondale as well as upgrades at one pump station. This expansion also will convert batching pipelines to single-product lines. Once this expansion is complete, Pembina will have segregated liquids transportation service for ethane+, propane+, crude, and condensate across multiple pipeline systems between Gordondale and the Edmonton area.
- Prince Rupert Terminal Expansion, which will increase propane export capacity to 40,000 b/d.
- Empress cogeneration.
Pembina placed its Duvernay sour gas treatment plant into service during the quarter. Pembina continues to progress Duvernay III, which includes a 100-MMcfd sweet gas, shallow cut processing train, 20,000 b/d of inlet condensate stabilization, and other associated infrastructure. Most of the packaged equipment and pipe racks have been fabricated and set in place. The mechanical contractor has mobilized and is fabricating interconnecting pipe to meet an expected fourth-quarter 2020 in-service date.
The company continues with construction of new fractionation and rail terminalling at its Empress NGL extraction plant. The project will add about 30,000 b/d of propane-plus fractionation capacity to the facility. Pipeline construction is complete, mechanical and electrical construction is progressing on the fractionation and rail sites, and rail track construction is expected to begin May 2020. The project has a total capital budget of $120 million and an anticipated late-2020 in-service date.
Development continues at Pembina's Prince Rupert Terminal on Watson Island, BC. The 25,000-b/d project will primarily source propane from the company's Redwater complex. Piping work, on site sphere assembly, and marine retrofit work continued until early March 2020. As a result of COVID-19, Pembina then had to shut down all site construction activities.
Pembina is working on a remobilization plan, with the sphere constructor scheduled to be back on site later in May 2020. Plans for remobilization of other contractors are being developed. The project’s in-service date has been delayed to first-quarter 2021, subject to regulatory and environmental approvals. The project has a capital budget of $250 million.
The company continues to progress its Hythe Developments project whereby Pembina and its 45%-owned joint venture, Veresen Midstream, will build natural gas gathering and processing infrastructure in the Pipestone Montney region. Construction is underway with an anticipated late-2020 in-service date.
Regulatory processes for the proposed 7.8-million tonne/year Jordan Cove LNG plant are ongoing. During the quarter, Pembina announced US Federal Energy Regulatory Commission (FERC) approval for both the plant in Coos Bay, Ore., and the 229-mile, 36-in. OD Pacific Connector gas pipeline, connecting Jordan Cove to the Ruby and Gas Transmission Northwest pipelines near Malin, Ore. (OGJ Online, Mar. 20, 2020).
Jordan Cove is the first US West Coast natural gas export project to be approved by FERC. The timing and ultimate sanctioning of this project is uncertain and dependent on receipt of remaining regulatory approvals. Project completion is expected in 2025, pending same approvals.
