The midstream sector in Canada has seen a wave of major infrastructure announcements as companies aim to meet rising global demand for crude oil and natural gas liquids (NGLs). This signals robust long-term growth and enhanced export capacity, benefiting the segment.
Key Takeaways
- Pembina Pipeline Corporation has sanctioned the $570 million Heartland Extraction Plant to expand regional NGL extraction capacity by late 2029.
- Keyera, AltaGas, and Canadian National Railway are partnering on the new ACE Rail Terminal to streamline NGL transport to the West Coast.
- South Bow Corporation secured 20-year binding commitments for its Prairie Connector pipeline, which could boost cross-border crude delivery to the U.S.
New Rail Alliances & Pipeline Expansions Unlock NGL Bottlenecks
Pembina Pipeline Corporation (PPL CN) has officially sanctioned the Heartland Extraction Plant (HEP), a 750 million cubic feet per day (MMcf/d) processing plant along the Yellowhead Pipeline. The project is estimated to cost $570 million and enter service in late 2029. The facility is backed by a long-term agreement to supply Dow (DOW) with ethane. It will scale to 22.5 thousand barrels per day (MBpd) by the end of 2030.
Management anticipates an EBITDA multiple of 5x to 7x, based on long-term average historical pricing. This consists of fixed-fee revenue streams and exposure to frac spreads. Simultaneously, Pembina amended its existing supply deal with Dow, increasing total commitments by 15% to 57.5 MBpd.
Also in the NGL space, Keyera Corp (KEY CN), AltaGas (ALA CN), and Canadian National Railway Company (CN) have partnered on the Alberta Corridor Export (ACE) Rail Terminal. This terminal will move roughly 45 MBpd of propane and butane from Fort Saskatchewan to AltaGas’s export facilities on the West Coast via unit trains by mid-2028. Keyera will own and operate ACE, making an initial investment of $240 million, which includes $100 million in incremental capital.
See more: How Geopolitical Shocks Are Fueling the North American LNG Boom
Meanwhile, on the crude oil side, South Bow Corporation (SOBO CN) has announced a successful open season for its proposed Prairie Connector project. The company secured 20-year binding commitments for crude oil transportation from Hardisty, Alberta to U.S. delivery points.
The project is targeting a final investment decision (FID) for mid-2027. It involves building roughly 380 km of new 36-inch pipeline while leveraging 150 km of existing infrastructure. The company said it will release further details regarding pre-FID activities and expected spending by the end of the second quarter.
Pembina, Keyera, and South Bow are constituents in the Alerian Midstream Energy Select Index (AMEI), a composite of North American energy infrastructure companies. Investors can access the index via the Alerian Energy Infrastructure ETF (ENFR) and the ALPS Alerian Energy Infrastructure Portfolio (ALEFX).
Wildfire Season Brings Risks for Midstream Players in Canada
Macro risks remain top of mind, as peak Canadian wildfire season gets underway. Multi-year drought conditions, coupled with forecasts for above-normal summer temperatures for nearly all Canadian regions, create favorable conditions for wildfires.
There are over 120 active fires throughout Canada as of June 4, according to the country’s interagency fire center. Most fires are currently in Manitoba, followed by British Columbia and Alberta, where many midstream companies operate and where much of Canada’s crude oil is produced.
In past years, midstream companies and producers temporarily shut down operations due to wildfires, impacting volumes. However, there have been no notable impacts on Canadian oil operations due to wildfires so far this year.
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