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Pembina announces deals to export propane from Oregon, access Bakken resource

CALGARY - Pembina Pipeline Corp. announced two deals Tuesday totalling more than US$1 billion that will enable it to export propane from the U.S. West Coast as well as access natural gas liquids from North Dakota's prolific Bakken formation.

In one deal, the Calgary-based company (TSX:PPL) inked an agreement with the Port of Portland, Ore., to develop a 37,000-barrel-per-day propane export facility with a price tag of US$500 million and an expected in-service date of early 2018.

Andrew Gruszecki, vice-president of business development, said Pembina likes how the port operates.

"Pembina is eager to progress the project under the terms of the terminal agreement to bring our plans for a significant investment in the Portland area to fruition, allowing us to provide an exciting opportunity for our shareholders and a market solution for our customers," he said.

"We are excited to work with the people of Portland on investment and employment opportunities for the near and long term."

Tankers would travel about 180 kilometres from the port to the Pacific Ocean via the Columbia River. Land is available to install storage, piping and marine infrastructure.

It's one of several proposals on the drawing board to help connect Canadian natural gas, and products made from it, to lucrative Asian markets.

In a statement, the Port of Portland said the Pembina project would be one of the largest private capital investments in the city's history and a "massive boon for the local economy."

"We have been extremely discerning when considering recent energy sector cargo opportunities, and after saying 'no' to coal and 'not now' to crude by rail, we are confident that we are saying 'yes' to the right partner at the right time," executive director Bill Wyatt said of the proposed facility, which will be served by rail.

"Propane has an excellent track record as a clean and safe alternative fuel, and I am impressed by the level of experience, expertise and commitment to safety that Pembina brings to the table."

The project is estimated to create up to 800 construction jobs and 40 permanent ones once the terminal is built.

Also on Tuesday, Pembina said it is buying a 700-kilometre pipeline system that originates in North Dakota that will give it access to natural gas liquids from the U.S. state's North Bakken formation.

The US$650-million transaction with private equity firm Riverstone Holdings LLC also includes an interest in a Saskatchewan extraction plant for ethane, a liquid byproduct of natural gas production.

Pembina says the Vantage pipeline system links a growing supply of ethane from North Dakota to the petrochemical market in Alberta.

The fee-for-service pipeline, terminating near Empress, Alta., is expected to have an ultimate capacity of about 60,000 barrels per day, up from its current 40,000, Pembina said.

"We have watched the development of these assets with great interest as they represent an excellent opportunity to expand our footprint into one of the most promising hydrocarbon plays in North America and, as such, the transaction is a low-risk, logical step out for Pembina," CEO Mick Dilger said.

Pembina said the transaction is expected to add to cash flow per share in 2016.

The deal includes Mistral Midstream Inc.'s interest in the Saskatchewan ethane extraction plant, which will connect to the Vantage pipeline system.

The deal is subject to regulatory approvals, including from the National Energy Board and the Canada Transportation Act. It is expected to close in the fourth quarter of 2014.

Pembina owns and operates pipelines that transport various hydrocarbon liquids including conventional and synthetic crude oil, heavy oil and oil sands products, condensate and natural gas liquids produced in Western Canada.

Pembina shares were up about 2.4 per cent at C$51.18 on the Toronto Stock Exchange Tuesday afternoon.

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