CALGARY — Keyera Facilities Income Fund (TSX:KEY.UN) and Inter Pipeline Fund (TSX:IPL.UN) have signed long-term supply agreements with Husky Oil Operations Ltd. to provide diluent transportation, storage and rail offload services.
Keyera’s arrangement with Husky Oil, a subsidiary of Husky Energy (TSX:HSE), covers supply of diluent to the Sunrise oilsands project 60 kilometres northeast of Fort McMurray starting in early 2014.
Diluent, or light oil, is blended with the thick, heavy oilsands crude so that it can flow more easily flow through a pipeline.
Keyera said Monday it will transport diluent from the Edmonton area through pipelines to the Sunrise site under a 20-year agreement, with payments based on capital investments and volumes.
The company will also store diluent for Husky under a fixed monthly fee agreement for at least 10 years, and provide offloading services for Husky at rail terminals in the area for a three-year term with payments on a per-barrel basis.
“Husky brings world class expertise in the production of heavy oil and bitumen to the Sunrise oilsands project, one of the largest oilsands projects in Alberta, and we are delighted to partner with them,” Keyera president and CEO Jim Bertram said in a release.
Inter Pipeline’s Polaris pipeline system will also be used to transport diluent between the Edmonton market hub and the Fort McMurray oilsands region. Under a 20-year contract, it will provide 30,000 barrels per day of capacity to Sunrise and plans to spend about $15 million on a new connection to Sunrise.
Inter Pipeline expects the contract to bring in about $27 million in pretax earnings per year.