CALGARY, Alberta, Oct 9 (Reuters) - Canadian midstream company Pembina Pipeline Corp is set to build a C$350 million ($314 million) condensate and diluent terminal in central Alberta that will include 600,000 barrels of storage, the company said on Thursday.
The Canadian Diluent Hub facility, in Fort Saskatchewan, near Edmonton, will be built at Pembina's Heartland terminal site and connect with the company's existing Peace pipeline system and pipelines serving the oil sands of northern Alberta.
"As the terminus of Pembina's condensate pipeline for its Peace system, the Heartland site is ideally located adjacent to all major diluent pipelines servicing the Athabasca oil sands producing region," said Paul Murphy, Pembina's senior vice president, pipeline and crude oil facilities.
Condensate, an ultra-light form of crude oil, is vital to oil sands producers in the Athabasca region of northern Alberta because the raw bitumen they produce is too viscous to flow without being diluted or heated.
Shippers add condensate or other diluents to bitumen to make "dilbit" crude that can flow through pipelines. Each barrel of oil sands crude contains about 30 percent diluent.
Until recently, Canadian condensate production was thought to be in decline, with the shortfall expected to be made up by imports from booming U.S. shale plays such as the Permian and Eagle Ford basins.
But increased drilling in liquids-rich plays such as the Duvernay and Montney in Alberta and northeastern British Columbia has prompted the Canadian Association of Petroleum Producers to up condensate production forecasts.
Pembina said its new diluent hub was being driven by that rising output in the Montney and Duvernay plays.
The company has also completed engineering studies to build additional rail facilities at the diluent hub and develop underground cavern storage. Pembina already has 20,000 barrels per day of rail import capacity and 500,000 barrels of underground diluent storage in the Fort Saskatchewan area.
Pembina said it expects to start phasing in storage and pipeline connections at the Canadian Diluent Hub in 2016 and be fully operational in the second quarter of 2017. (Reporting by Nia Williams; Editing by Peter Galloway)