Construction is underway on a new pipeline giving optionality to producers on the Alberta side of the Viking light oil play, where production is growing and economics are top-tier.
In August, Inter Pipeline Ltd. announced an immediate start to construction on the Viking Connector, a $100-million project to transport 10,000 to 15,000 barrels per day (bpd) from east-central Alberta to the Edmonton region.
The Viking play straddles the border of Alberta and west-central Saskatchewan, with the majority of production currently coming from the Saskatchewan side.
It’s one of the most economic plays in the Western Canada Sedimentary Basin, thanks to low costs and short-cycle returns, analysts with Peters & Co. Limited wrote in a recent research note.
Based on US$55/bbl WTI and C$65/bbl for Edmonton Par, Peters & Co. estimates a horizontal well on the Viking’s Saskatchewan side to have a half-cycle payout period of 1.7 years and a 75 percent rate of return. On the Alberta side, a horizontal Viking well is estimated to have a half-cycle payout period of 2.2 years with a 50 percent rate of return.
This compares to Peters’ highest-rated Canadian oil play, Clearwater at Marten Hills/Nipisi, which has a half-cycle payout period of 0.9 years and a 187 percent rate of return, with WTI at US$55/bbl and Par at C$65/bbl.
Pipeline activity has been busy in the Viking play, on both sides of the border.
In October 2018, Secure Energy Services Inc. completed its 80,000 bpd Kerrobert Light Pipeline System in Saskatchewan, which is primarily for Viking service, executive vice-president Allen Gransch told Pipeline News at the time.
On the Alberta side, in Q1/2019 Gibson Energy Inc. placed its new $50-million Viking Pipeline into service; a 120-kilometre link extending the reach of its existing Provost Pipeline to its Hardisty Terminal, with initial capacity of 13,300 bpd and potential to expand to an estimated 25,000 bpd.
Inter Pipeline’s 75-kilometre Viking Connector will for the first time provide pipeline transportation for producers in the Alberta Viking area to reach the Edmonton market, CEO Christian Bayle told the Daily Oil Bulletin.
“We think is going to be very attractive for light oil producers and be a great piece of new business for Inter Pipe,” he said.
The company expects initial throughput of 10,000 to 15,000 bpd when the Viking Connector is completed in the first half of 2020.
