CALGARY - Inter Pipeline Fund's Polaris pipeline system has begun serving Imperial Oil Ltd.'s Kearl oilsands mine in northern Alberta.
The Calgary-based pipeline company (TSX:IPL.UN) said Monday that it is now generating cash flow under a 25-year agreement to ship diluent — used to thin out bitumen so that it can flow through pipelines — to Kearl.
The $90-million project to connect Kearl to the Polaris system was completed on schedule and below budget, Inter Pipeline said in a release.
Imperial (TSX:IMO), majority-owned by Houston energy giant ExxonMobil Corp., has signed up to ship 60,000 barrels per day on Polaris.
Under the ship-or-pay contract with Imperial, Inter Pipeline will earn about $36 million annually in earnings before interest, taxes, depreciation and amortization for the next 25 years. Cash flow doesn't depend on commodity prices or throughput levels, Inter Pipeline said.
In releasing its second-quarter results last month, Imperial said the $10.9-billion Kearl project was nearing completion.
Inter Pipeline has a $1-billion capital program underway to expand the Polaris pipeline to serve oilsands projects jointly owned by Cenovus Energy Inc. (TSX:CVE) and ConocoPhillips.
Once complete, capacity on the system should rise to 820,000 barrels per day from 120,000 barrels per day.
Inter Pipeline has long-term shipping arrangements for half of the total expansion capacity and says it is "aggressively" looking to attract more customers for the rest.
Inter Pipeline units were down 19 cents at $21.53 at midday Monday on the Toronto Stock Exchange.