CALGARY, Alberta, March 31 (Reuters) - Canada's Keyera Corp and midstream giant Kinder Morgan Inc plan to build 4.8 million barrels of new crude oil storage in the marketing hub of Edmonton, Alberta, Keyera said in a statement on Tuesday.
Capacity at the new terminal has potential to increase to 6.6 million barrels, depending on future demand.
The new terminal will be a 50-50 joint venture with Keyera's share of costs expected to be C$330 million, while Kinder Morgan will potentially spend C$342 million on construction of tanks and a further C$69 million on connecting pipelines and infrastructure.
In total, the two companies will build 12 crude storage tanks on land owned by Keyera. Commissioning on the first tanks is expected to start in the second half of 2017.
The initial 4.8 million barrels of storage is underpinned by a number of longterm take-or-pay contracts. It will be connected to Kinder Morgan's existing Edmonton storage terminals, the Trans Mountain pipeline to Canada's Pacific Coast and two Edmonton crude-by-rail terminals.
Kinder Morgan, which recently added 5.32 million barrels of storage in Edmonton as part of an expansion project, will oversee construction and operate the new terminal once it is in service.
"When this initial project is completed, we will have grown our merchant storage, exclusive of our Trans Mountain regulated storage assets, from basically zero tankage to a 12-million-barrel position in roughly a 10-year period," said Kinder Morgan Terminals President John Schlosser.
Edmonton, one of Western Canada's major crude storage and rketing hubs, is a gathering point for oil sands production before it is shipped via pipeline or rail to markets in eastern Canada and the United States.
Last week energy intelligence firm Genscape reported inventories in Edmonton hit a record high of more than 10 million barrels, roughly 64 percent of capacity. (Reporting by Nia Williams; Editing by David Gregorio)