Canada’s Pembina Pipeline Corp (PPL.TO) has agreed to buy Kinder Morgan Canada (KML.TO) and the U.S. portion of the Cochin pipeline for C$4.35 billion ($3.28 billion), bulking up its storage resources in Canada.
Years of delay in building new pipelines have led to Western Canada’s oil production outpacing takeaway capacity and driven up demand for storage tanks.
Pembina’s deal follows an unsolicited bid for rival Inter Pipeline Ltd (IPL.TO), highlighting growing interest in the midstream business of transporting and storing crude.
The sale of Kinder Morgan Canada, whose parent is Houston-based Kinder Morgan Inc (KMI.N), also represents the exit of another foreign company from Canada’s oil sector.
The deal “makes sense” for Pembina, said Tortoise Advisors portfolio manager Rob Thummel. It receives stable revenue streams based on fees and take or pay contracts that are insulated from volatile commodity prices.