Keyera Facilities Income Fund announces oil sands services agreement with Imperial Oil

Sunday November 15, 2009
Written by Newswire
CALGARY, AB - Keyera Facilities Income Fund recently announced that it has entered into a long-term agreement with Imperial Oil Resources Ventures Limited to provide diluent transportation, storage and rail offload services in the Edmonton/Fort Saskatchewan area for Imperial's Kearl oil sands project. Diluent is a light hydrocarbon, most often condensate, which is blended with bitumen to enable it to flow via pipeline to upgrading facilities. This agreement will provide Keyera with secure, long-term, fee-for-service revenues, beginning in late 2012, as well as the potential to generate significant incremental new business opportunities.
Under the terms of the agreement, Keyera will transport diluent by pipeline from supply sources in the Edmonton area to a diluent delivery pipeline north of Fort Saskatchewan for delivery to the Kearl site located near Fort McMurray. Keyera will also provide diluent storage and rail offload services at the Alberta Diluent Terminal (ADT) and the Edmonton Terminal, both owned 100% by Keyera, as well as at the Keyera operated Fort Saskatchewan Fractionation and Storage Facility (KFS). To provide these services to Imperial, Keyera will construct additional pipeline connections and pumping and metering facilities to extend and enhance its existing infrastructure.

"We are delighted to partner with Imperial, a recognized leader in the development of heavy oil and oil sands projects in Alberta," said Jim Bertram, President and CEO of Keyera. "The Kearl project is a world class oil sands development and our agreement with Imperial represents the next step in the development of our oil sands services growth strategy. The investments we have made to expand our facilities and develop new infrastructure over the past several years have strengthened our position in this region and enhanced our ability to handle the receipt, transportation and storage of diluent for oil sands producers such as Imperial. Our intention is to use this infrastructure to also provide cost effective services to other customers as the oil sands sector grows."

Description of Services
Transportation - Under the agreement, Imperial will be provided with transport capacity within existing and new-build pipeline infrastructure to match Imperial's expected diluent requirements for its Kearl development. The transportation portion of the agreement has an initial term of 25 years.

Keyera will invest in the following facility modifications: an 18 kilometre extension to the Fort Saskatchewan pipeline system north from the KFS facility; a new pump station at the Edmonton Terminal; and a short pipeline connection to increase diluent supply into Keyera's Edmonton Terminal. These facilities are currently expected to cost approximately $58 million. Keyera intends to fund this expenditure from cash flow from operations and its existing credit facility.

Imperial will pay an annual capital payment based on a portion of the new capital investment relating to their capacity commitment. In addition, Imperial will pay a per-barrel tariff for their volumes shipped on the existing Fort Saskatchewan pipeline system.

The capacity of the new facilities will exceed Imperial's Kearl requirements. Keyera can use the remaining capacity to provide similar services to other oil sands customers.

Storage - Under the agreement, Keyera will also provide Imperial with diluent storage services using its storage capacity in the Edmonton/Fort Saskatchewan area. The multiple supply connections and high rate injection/withdrawal capabilities will enable Keyera to meet Imperial's storage needs. Imperial will pay a fixed monthly fee for this service. The storage portion of the agreement has an initial term of 15 years.

Rail Offload - Keyera will provide diluent offload services for Imperial at rail terminals located at ADT and the Edmonton Terminal. ADT and the Edmonton Terminal are currently connected to Keyera operated pipeline infrastructure and storage facilities in the Edmonton/Fort Saskatchewan area.

Imperial will pay a per-barrel fee for the rail offload service. The rail offload agreement is for a 5 year term.

For further information about Keyera Facilities Income Fund, visit

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