Exhibit 99.1







PEMBINA PIPELINE
CORPORATION



ANNUAL INFORMATION
FORM



For the Year Ended December 31, 2016



February 23, 2017











TABLE OF CONTENTS





|                                                            | Page  
|----------------------------------------------------------- | ------
|                                                            |       
|GLOSSARY OF TERMS                                           | - 1 - 
|                                                            |       
|ABBREVIATIONS AND CONVERSIONS                               | - 8 - 
|                                                            |       
|NON–GAAP MEASURES                                           | - 9 - 
|                                                            |       
|FORWARD–LOOKING STATEMENTS AND INFORMATION                  | - 9 - 
|                                                            |       
|CORPORATE STRUCTURE                                         | - 13 -
|                                                            |       
|Name, Address and Formation                                 | - 13 -
|Pembina's Subsidiaries                                      | - 13 -
|Amended Articles                                            | - 13 -
|                                                            |       
|GENERAL DEVELOPMENTS OF PEMBINA                             | - 14 -
|                                                            |       
|Developments in 2014                                        | - 14 -
|Developments in 2015                                        | - 15 -
|Developments in 2016                                        | - 17 -
|                                                            |       
|2017 Year to Date Developments                              | - 18 -
|                                                            |       
|DESCRIPTION OF PEMBINA'S BUSINESS AND OPERATIONS            | -20  -
|                                                            |       
|Pembina's Business Objective and Strategy                   | -20  -
|Overview of Pembina's Business                              | -20  -
|Operations Overview                                         | - 21 -
|Conventional Pipelines Business                             | - 23 -
|Oil Sands & Heavy Oil Business                              | - 26 -
|Gas Services Business                                       | - 27 -
|Midstream Business                                          | - 28 -
|                                                            |       
|OTHER INFORMATION RELATING TO PEMBINA'S BUSINESS            | - 31 -
|                                                            |       
|Information and Communication Systems                       | - 31 -
|Integrity Management                                        | - 31 -
|Environmental Matters                                       | - 33 -
|Safety Management Systems                                   | - 33 -
|Pipeline Rights-of-Way and Land Tenure                      | - 34 -
|Indemnification and Insurance                               | - 34 -
|Employees                                                   | - 34 -
|Corporate Governance and Corporate Social Responsibility    | - 35 -
|                                                            |       
|CANADIAN OIL AND GAS INDUSTRY                               | - 37 -
|                                                            |       
|General                                                     | - 37 -
|Canadian Crude and Heavy Oil Overview                       | - 37 -
|NGL Overview                                                | - 38 -
|Midstream Services for Crude Oil, Synthetic Crude Oil & NGL | -40  -
|                                                            |       
|DESCRIPTION OF THE CAPITAL STRUCTURE OF PEMBINA             | -41  -
|                                                            |       
|Common Shares                                               | - 41 -
|Class A Preferred Shares                                    | - 41 -
|Class B Preferred Shares                                    | - 43 -
|Premium DividendTM and Dividend Reinvestment Plan            | - 43 -
|Series F Convertible Debentures                             | - 43 -
|Credit Facilities                                           | - 44 -













TABLE OF CONTENTS 
(continued)





|                                                                         | Page  
|------------------------------------------------------------------------ | ------
|                                                                         |       
|Medium Term Notes                                                        | - 44 -
|Other Debt                                                               | - 45 -
|Credit Ratings                                                           | - 45 -
|                                                                         |       
|DIVIDENDS AND DISTRIBUTIONS                                              | - 47 -
|                                                                         |       
|Cash Dividends                                                           | - 47 -
|                                                                         |       
|MARKET FOR SECURITIES                                                    | - 49 -
|                                                                         |       
|Trading Price and Volume                                                 | - 49 -
|Prior Sales                                                              | - 51 -
|                                                                         |       
|DIRECTORS AND OFFICERS                                                   | - 51 -
|                                                                         |       
|Directors of Pembina                                                     | - 51 -
|Executive Officers of Pembina                                            | - 53 -
|Conflicts of Interest                                                    | - 55 -
|                                                                         |       
|AUDIT COMMITTEE INFORMATION                                              | - 55 -
|                                                                         |       
|The Audit Committee's Charter                                            | - 55 -
|Composition of the Audit Committee and Relevant Education and Experience | - 55 -
|Pre-Approval Policies and Procedures for Audit and Non-Audit Services    | - 56 -
|External Auditor Service Fees                                            | - 57 -
|                                                                         |       
|RISK FACTORS                                                             | - 57 -
|                                                                         |       
|Risks Inherent in Pembina's Business                                     | - 58 -
|Risk Factors Relating to the Securities of Pembina                       | - 66 -
|General Risk Factors                                                     | - 67 -
|                                                                         |       
|INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS               | -71  -
|                                                                         |       
|MATERIAL CONTRACTS                                                       | -71  -
|                                                                         |       
|LEGAL PROCEEDINGS AND REGULATORY ACTIONS                                 | - 71 -
|                                                                         |       
|REGISTRAR AND TRANSFER AGENT                                             | - 71 -
|                                                                         |       
|INTERESTS OF EXPERTS                                                     | - 71 -
|                                                                         |       
|ADDITIONAL INFORMATION                                                   | - 71 -
|                                                                         |       
|APPENDIX "A" – AUDIT COMMITTEE CHARTER                                   | A-1   





ii







GLOSSARY OF TERMS



Terms used in this Annual Information Form
and not otherwise defined have the meanings set forth below:



"2013 Base Shelf Prospectus"
means the final short form base shelf prospectus filed with the securities commissions or similar regulatory authorities in each
of the provinces of Canada on February 22, 2013 allowing Pembina to offer and issue, from time to time: (i) Common Shares; (ii)
preferred shares; (iii) any bonds, debentures, notes or other evidences of indebtedness of any kind, nature or description of Pembina;
(iv) warrants; and (v) subscription receipts of Pembina of up to $3,000,000,000 aggregate initial offering price (or the equivalent
thereof in one or more foreign currencies or composite currencies, including United States dollars) during the 25 month period
that the 2013 Base Shelf Prospectus was valid;



"2015 Base Shelf Prospectus"
means the final short form base shelf prospectus filed with the securities commissions or similar regulatory authorities in each
of the provinces of Canada on March 18, 2015 allowing Pembina to offer and issue, from time to time: (i) Common Shares; (ii) preferred
shares; (iii) any bonds, debentures, notes or other evidences of indebtedness of any kind, nature or description of Pembina ("Debt
Securities"); (iv) warrants to purchase Common Shares and warrants to purchase Debt Securities; and (v) subscription receipts
of Pembina (together with the foregoing, collectively, the "Securities") of up to $5,000,000,000 aggregate initial
offering price of Securities (or the equivalent thereof in one or more foreign currencies or composite currencies, including United
States dollars) during the 25 month period that the 2015 Base Shelf Prospectus is valid, which Securities may be offered separately
or together, in amounts, at prices and on terms to be determined based on market conditions at the time of the sale and set forth
in one or more shelf prospectus supplements;



"ABCA" means the Business
Corporations Act (Alberta), R.S.A. 2000, c. B-9, as amended from time to time, including the regulations promulgated thereunder;



"AER" means the Alberta Energy
Regulator;



"B.C. Pipelines" means, collectively,
the NEBC Pipeline and the Western Pipeline, as well as some connector pipelines and provincially regulated pipelines located in
British Columbia;



"BCOGC" means the British
Columbia Oil and Gas Commission;



"BCUC" means the British Columbia
Utilities Commission;



"Board" or "Board
of Directors" means the board of directors of Pembina from time to time;



"Canadian Diluent Hub" or
"CDH" has the meaning ascribed thereto under "Description of Pembina's Business and Operations
– Midstream Business";



"Cheecham Lateral" means the
lateral pipeline and related facilities, as expanded, delivering synthetic crude oil from a pump station on the Syncrude Pipeline
to a terminalling facility located near Cheecham, Alberta;



"Class A Preferred Shares"
means class A preferred shares of Pembina, issuable in series, and where the context requires includes the Series 1 Class A Preferred
Shares, the Series 2 Class A Preferred Shares, the Series 3 Class A Preferred Shares, the Series 4 Class A Preferred Shares, the
Series 5 Class A Preferred Shares, the Series 6 Class A Preferred Shares, the Series 7 Class A Preferred Shares, the Series 8 Class
A Preferred Shares, the Series 9 Class A Preferred Shares, the Series 10 Class A Preferred Shares, the Series 11 Class A Preferred
Shares, the Series 12 Class A Preferred Shares, the Series 13 Class A Preferred Shares and the Series 14 Class A Preferred Shares;



"Class B Preferred Shares"
means class B preferred shares of Pembina;



- 1 -







"Common Shares" means the
common shares in the capital of Pembina;



"Company" or "Pembina"
means Pembina Pipeline Corporation, an ABCA corporation and, unless the context otherwise requires, includes its subsidiaries;



"condensate" means a mixture
consisting primarily of pentanes and heavier hydrocarbon liquids;



"Credit Facilities" has the
meaning ascribed thereto under "Description of the Capital Structure of Pembina – Credit Facilities";



"Cutbank Complex" has the
meaning ascribed thereto under "Description of Pembina's Business and Operations – Gas Services Business";



"Cutbank Gas Plant" means
Pembina's shallow cut sweet gas processing facility located at 07-16-062-08 W6M;



"deep cut" means ethane-plus
extraction gas processing capabilities;



"DRIP" means Pembina's Premium
DividendTM(1) and Dividend Reinvestment Plan and all associated agreements, which were amended and restated effective
January 6, 2016;



"Duvernay I" has the meaning
ascribed thereto under "General Developments of Pembina – Developments in 2015";



"Empress East" has the meaning
ascribed thereto under the heading "Description of Pembina's Business and Operations – Midstream Business
– Overview";



"Financial Statements" means
Pembina's audited, consolidated financial statements for the period ended December 31, 2016;



"Form 40-F" means Pembina's
annual report on Form 40-F for the fiscal year ended December 31, 2016 filed with the SEC;



"Fund" has the meaning ascribed
thereto under "Corporate Structure – Name, Address and Formation";



"Horizon Expansion" has the
meaning ascribed thereto under "General Developments of Pembina – Developments in 2016";



"Horizon Pipeline" means the
pipeline system and related facilities, as expanded by the Horizon Expansion, designed to deliver synthetic crude oil from the
Horizon Project into the Edmonton, Alberta area. See "Description of Pembina's Business and Operations – Oil Sands
& Heavy Oil Business";



"Horizon Project" means the
Horizon Oil Sands Project located approximately 70 kms north of Fort McMurray, Alberta;



"HVP" means high vapour pressure;



"Kakwa Gas Plant" means Pembina's
50 percent interest in the shallow cut sweet gas processing facility located at 01-35-060-05 W6M;










1TM denotes Trademark of
Canaccord Genuity Corp.



- 2 -







"Kakwa River Facility" has
the meaning ascribed thereto under "General Developments of Pembina – Developments in 2016";



"LVP" means low vapour pressure;



"MD&A" means Pembina's
management's discussion and analysis for the year ended December 31, 2016, an electronic copy of which is available on Pembina's
profile on the SEDAR website at www.sedar.com, and in Pembina's annual report on Form 40-F filed on the EDGAR website at www.sec.gov,
or at www.pembina.com;



"Medium Term Note Indenture"
means the indenture dated March 29, 2011 between Pembina, Pouce Coupé Pipe Line Ltd., Plateau Pipe Line Ltd., Alberta Oil
Sands Pipeline Ltd., Pembina Pipeline (an Alberta partnership), Pembina North Limited Partnership, Pembina West Limited Partnership,
Pembina Oil Sands Pipeline L.P., Pembina Marketing Ltd., Pembina Midstream Limited Partnership, Pembina Gas Services Ltd., Pembina
Gas Services Limited Partnership and Computershare Trust Company of Canada, as supplemented by the first supplemental note indenture
dated April 2, 2012 between Pembina, Pembina NGL Corporation, 1598313 Alberta Ltd., Provident Infrastructure and Logistics LP,
Provident Midstream Holdings GP ULC, Provident Midstream Inc., Provident GP Inc., Provident Facilities (NGL) Ltd., Provident Facilities
(NGL) L.P., 1195714 Alberta Ltd., 1444767 Alberta Ltd., Provident Energy Pipeline Inc., Empress NGL Partnership, Kinetic Resources
(LPG), Pro Holding Company, Provident Midstream (USA) Inc., Pro US LLC, Pro Midstream Company, Kinetic Resources (U.S.A.), Pro
GP Corp., Pro LP Corp., Terraquest, Inc. and Computershare Trust Company of Canada, and as further supplemented by the second supplemental
note indenture dated October 24, 2014 among Pembina, Pembina Prairie Facilities Ltd., Pembina Prairie Facilities Holdco Ltd. and
Computershare Trust Company of Canada, providing for the issuance of the Medium Term Notes;



"Medium Term Notes" means,
collectively, the Medium Term Notes, Series 1, the Medium Term Notes, Series 2, the Medium Term Notes, Series 3, the Medium Term
Notes, Series 4, the Medium Term Notes, Series 5, the Medium Term Notes, Series 6, the Medium Term Notes, Series 7, the Medium
Term Notes, Series 8 and the Medium Term Notes, Series 9;



"Medium Term Notes, Series 1"
means the $250 million aggregate principal amount of medium term notes of Pembina issued March 29, 2011. See "Description
of the Capital Structure of Pembina – Medium Term Notes";



"Medium Term Notes, Series 2"
means the $450 million aggregate principal amount of medium term notes of Pembina issued October 22, 2012. See "Description
of the Capital Structure of Pembina – Medium Term Notes";



"Medium Term Notes, Series 3"
means the $200 million, $150 million and $100 million aggregate principal amount of medium term notes of Pembina issued April 30,
2013, February 2, 2015 and June 16, 2015 respectively. See "Description of the Capital Structure of Pembina – Medium
Term Notes";



"Medium Term Notes, Series 4"
means the $600 million aggregate principal amount of medium term notes of Pembina issued April 4, 2014. See "Description
of the Capital Structure of Pembina – Medium Term Notes";



"Medium Term Notes, Series 5"
means the $450 million aggregate principal amount of medium term notes of Pembina issued February 2, 2015. See "Description
of the Capital Structure of Pembina – Medium Term Notes";



"Medium Term Notes, Series 6"
means the $500 million aggregate principal amount of medium term notes of Pembina issued June 16, 2015. See "Description
of the Capital Structure of Pembina – Medium Term Notes";



"Medium Term Notes, Series 7"
means the $500 million aggregate principal amount of medium term notes of Pembina issued August 11, 2016. See "Description
of the Capital Structure of Pembina – Medium Term Notes";



- 3 -







"Medium Term Notes, Series 8"
means the $300 million aggregate principal amount of medium term notes of Pembina issued January 20, 2017. See "Description
of the Capital Structure of Pembina – Medium Term Notes";



"Medium Term Notes, Series 9"
means the $300 million aggregate principal amount of medium term notes of Pembina issued January 20, 2017. See "Description
of the Capital Structure of Pembina – Medium Term Notes";



"Mitsue Pipeline" means the
pipeline system and related facilities delivering condensate from Whitecourt, Alberta to Utikuma, Alberta for use as diluent for
heavy oil;



"Musreau I" means the Musreau
A, Musreau C and Musreau D trains, shallow cut sweet gas processing facility, owned 100 percent by Pembina, and Pembina's 50 percent
interest in the Musreau B train, located at 04-25-062-06 W6M;



"Musreau II" means Pembina's
100 MMcf/d shallow cut sweet gas processing plant and associated NGL and gas gathering pipelines near Musreau I;



"Musreau III" has the meaning
ascribed thereto under "General Developments of Pembina – Developments in 2014";



"Musreau Deep Cut" means the
205 MMcf/d NGL extraction facility and related 10 km NGL sales pipeline connected to the Peace Pipeline and located at the Musreau
I facility;



"NEB" means the National Energy
Board;



"NEBC Expansion" has the meaning
ascribed thereto under "General Developments of Pembina – Developments in 2014";



"NEBC Pipeline" means the
pipeline system and related facilities delivering crude oil and condensate from northeastern British Columbia to Taylor, British
Columbia;



"NGL" means natural gas liquids,
including ethane, propane, butane and condensate;



"Nipisi Pipeline" means the
pipeline system and related facilities delivering blended heavy oil from Utikuma, Alberta to Edmonton, Alberta;



"Northern Pipeline" means
the pipeline system and related facilities delivering NGL from Taylor, British Columbia to Fort Saskatchewan, Alberta;



"Northwest Pipeline" means
the pipeline system and related facilities delivering crude oil from northeastern British Columbia to Boundary Lake, Alberta;



"NYSE" means the New York
Stock Exchange;



"Option Plan" means the stock
option plan of Pembina approved by the Shareholders on May 26, 2011, as amended effective February 26, 2015;



"Peace Pipeline" means the
pipeline system and related facilities delivering light crude oil, condensate, propane mix (C3+) and ethane mix (C2+)
from northwestern Alberta to Edmonton, Alberta and to Fort Saskatchewan, Alberta;



"Pembina Nexus Terminal"
means Pembina's terminalling and storage facilities located in the Edmonton, Alberta area and forming an integral part of the
terminal connecting key infrastructure in the Edmonton-Fort Saskatchewan-Namao, Alberta area, as further described under "Description
of Pembina's Business and Operations – Midstream Business";



"Phase II HVP Expansion" means
the increase of NGL capacity on the Peace/Northern NGL System by 53 mbpd;



- 4 -







"Phase II LVP Expansion" means
the increase of crude oil and condensate capacity on the Peace Pipeline by 55 mbpd;



"Phase III Expansion" means
pipeline expansions, underpinned by long-term, fee-for-service agreements in Pembina's operating areas, following and expanding
on certain segments of Pembina's existing Northern and Peace Pipeline systems from Taylor, British Columbia southeast to Edmonton,
Alberta;



"Pouce Coupé Pipeline"
means the pipeline system and related facilities delivering sweet crude oil and HVP hydrocarbon products from Dawson Creek, British
Columbia to Pouce Coupé, Alberta;



"Premium DividendTM"
has the meaning ascribed thereto under "Description of Capital Structure - Premium DividendTM and Dividend Reinvestment
Plan";



"Redemption" has the meaning
ascribed thereto under "General Developments of Pembina – Developments in 2015";



"Redwater West" has the meaning
ascribed thereto under the heading "Description of Pembina's Business and Operations – Midstream Business
– Overview";



"Resthaven Facility" has
the meaning ascribed thereto under "Description of Pembina's Business and Operations – Gas Services
Business";



"Resthaven Expansion" has
the meaning ascribed thereto under "General Developments of Pembina – Developments in 2014";



"RFS I" means Pembina's 73
mbpd NGL fractionator at Redwater, Alberta;



"RFS II" means
Pembina's second 73 mbpd fractionator at Redwater, Alberta;



"RFS III" means
Pembina's 55 mbpd fractionator at Redwater, Alberta, scheduled to be completed early in the third quarter of 2017;



"Saturn I" means Pembina's
deep cut NGL extraction facility located in the Berland area of Alberta with 200 MMcf/d of extraction capacity;



"Saturn II" means Pembina's
second deep cut NGL extraction facility in the Berland area, a twin of Saturn I;



"Saturn Complex" has the
meaning ascribed thereto under "Description of Pembina's Business and Operations – Gas Services Business";



"SCADA" means supervisory
control and data acquisition. See "Other Information Relating to Pembina's Business – Information and Communication
Systems";



"SEC" means the United States
Securities and Exchange Commission;



"SEEP" has the meaning ascribed
thereto under "Description of Pembina's Business and Operations – Gas Services Business";



"Senior Notes" means, collectively,
the Series C Senior Notes and the Series D Senior Notes;



"Series 1 Class A Preferred Shares"
means the cumulative redeemable rate reset Class A Preferred Shares, series 1 of Pembina, issued July 26, 2013. See "Description
of the Capital Structure of Pembina – Class A Preferred Shares";



- 5 -







"Series 2 Class A Preferred Shares"
means the cumulative redeemable floating rate Class A Preferred Shares, series 2 of Pembina, issuable on conversion of the Series
1 Class A Preferred Shares. See "Description of the Capital Structure of Pembina – Class A Preferred Shares";



"Series 3 Class A Preferred Shares"
means the cumulative redeemable rate reset Class A Preferred Shares, series 3 of Pembina, issued October 2, 2013. See "Description
of the Capital Structure of Pembina – Class A Preferred Shares";



"Series 4 Class A Preferred Shares"
means the cumulative redeemable floating rate Class A Preferred Shares, series 4 of Pembina, issuable on conversion of the Series
3 Class A Preferred Shares. See "Description of the Capital Structure of Pembina – Class A Preferred Shares";



"Series 5 Class A Preferred Shares"
means the cumulative redeemable rate reset Class A Preferred Shares, series 5 of Pembina, issued January 16, 2014. See "Description
of the Capital Structure of Pembina – Class A Preferred Shares";



"Series 6 Class A Preferred Shares"
means the cumulative redeemable floating rate Class A Preferred Shares, series 6 of Pembina, issuable on conversion of the Series
5 Class A Preferred Shares. See "Description of the Capital Structure of Pembina – Class A Preferred Shares";



"Series 7 Class A Preferred Shares"
means the cumulative redeemable rate reset Class A Preferred Shares, series 7 of Pembina, issued September 11, 2014. See "Description
of the Capital Structure of Pembina – Class A Preferred Shares";



"Series 8 Class A Preferred Shares"
means the cumulative redeemable floating rate Class A Preferred Shares, series 8 of Pembina, issuable on conversion of the Series
7 Class A Preferred Shares. See "Description of the Capital Structure of Pembina – Class A Preferred Shares";



"Series 9 Class A Preferred Shares"
means the cumulative redeemable rate reset Class A Preferred Shares, series 9 of Pembina, issued April 10, 2015. See "Description
of the Capital Structure of Pembina – Class A Preferred Shares";



"Series 10 Class A Preferred Shares"
means the cumulative redeemable floating rate Class A Preferred Shares, series 10 of Pembina, issuable on conversion of the Series
9 Class A Preferred Shares. See "Description of the Capital Structure of Pembina – Class A Preferred Shares";



"Series 11 Class A Preferred Shares"
means the cumulative redeemable minimum rate reset Class A Preferred Shares, series 11 of Pembina, issued January 15, 2016. See
"Description of the Capital Structure of Pembina – Class A Preferred Shares";



"Series 12 Class A Preferred Shares"
means the cumulative redeemable floating rate Class A Preferred Shares, series 12 of Pembina, issuable on conversion of the Series
11 Class A Preferred Shares. See "Description of the Capital Structure of Pembina – Class A Preferred Shares";



"Series 13 Class A Preferred Shares"
means the cumulative redeemable minimum rate reset Class A Preferred Shares, series 13 of Pembina, issued April 27, 2016. See "Description
of the Capital Structure of Pembina – Class A Preferred Shares";



"Series 14 Class A Preferred Shares"
means the cumulative redeemable floating rate Class A Preferred Shares, series 14 of Pembina, issuable on conversion of the Series
13 Class A Preferred Shares. See "Description of the Capital Structure of Pembina – Class A Preferred Shares";



"Series C Convertible Debentures"
means the 5.75 percent convertible unsecured subordinated debentures of Pembina issued November 24, 2010 and redeemed by Pembina
on October 13, 2015;



- 6 -







"Series C Senior Notes" has
the meaning ascribed thereto under "Description of the Capital Structure of Pembina – Other Debt";



"Series D Senior Notes" has
the meaning ascribed thereto under "Description of the Capital Structure of Pembina – Other Debt";



"Series E Convertible Debentures"
means the 5.75 percent convertible unsecured subordinated debentures issued by Provident Energy Ltd. on November 1, 2010, assumed
by Pembina in April 2012 and redeemed by Pembina on October 13, 2015;



"Series F Convertible Debentures"
means the 5.75 percent convertible unsecured subordinated debentures maturing December 31, 2018 issued by Provident Energy Ltd.
on April 29, 2011 and assumed by Pembina in April 2012;



"SGER" has the meaning ascribed
thereto under "General Risk Factors- Regulation";



"shallow cut" means sweet
gas processing with propane and/or condensate-plus extraction capabilities;



"Shareholders" means the holders
of Common Shares;



"Syncrude Pipeline" means
the pipeline system and related facilities delivering synthetic crude oil from the Syncrude Project into the Edmonton, Alberta
area;



"Syncrude Project" means the
joint venture that was formed for the recovery of oil sands, crude bitumen or products derived from the Athabasca oil sands, located
near Fort McMurray, Alberta;



"take-or-pay" has the meaning
ascribed thereto under "Conventional Pipelines – Contractual Arrangements – Firm Contracting";



"Taylor to Boundary Lake Pipeline"
means the pipeline and related facilities delivering sweet HVP hydrocarbon products from Taylor, British Columbia to Boundary Lake,
Alberta;



"throughput" means volume
of product delivered through a pipeline;



"TSX" means the Toronto Stock
Exchange;



"Vantage Acquisition" has
the meaning ascribed thereto under "General Developments of Pembina – Developments in 2014";



"Vantage Expansion" has the
meaning ascribed thereto under "General Developments of Pembina – Developments in 2016";



"Vantage Pipeline" means the
HVP pipeline that links a growing supply of ethane from the North Dakota Bakken play to the petrochemical market in Alberta, originating
from a large-scale gas plant in Tioga, North Dakota extending approximately northwest through Saskatchewan and terminating near
Empress, Alberta, where it is connected to the Alberta Ethane Gathering System pipeline (wholly-owned by a third-party);



"WCSB" means the Western Canadian
Sedimentary Basin; and



"Western Pipeline" means the
pipeline system and related facilities delivering crude oil from Taylor, British Columbia to Kamloops, British Columbia.



- 7 -







All dollar amounts set forth in this Annual
Information Form are in Canadian dollars unless otherwise indicated. References to "$" or "C$" are to Canadian
dollars and references to "US$" are to United States dollars. On February 22, 2017, the exchange rate based on the noon
rate as reported by the Bank of Canada, was C$1.00 equals US$0.76.



Except where otherwise indicated, all information
in this Annual Information Form is presented as at the end of Pembina's most recently completed financial year, being December
31, 2016.



A reference made in this Annual Information
Form to other documents or to information or documents available on a website, does not constitute the incorporation by reference
into this Annual Information Form of such other documents or such other information or documents available on such website unless
otherwise stated.



ABBREVIATIONS AND CONVERSIONS



In this Annual Information Form, the following
abbreviations have the indicated meanings:



|mbbls                         | thousands of barrels, each barrel representing 34.972 Imperial gallons or 42 US gallons                                                                                                  
|----------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|mmbbls                        | millions of barrels                                                                                                                                                                      
|mbpd                          | thousands of barrels per day                                                                                                                                                             
|MMcf/d                        | million cubic feet per day                                                                                                                                                               
|mboe/d
        
        bcf/d | thousands of barrels of oil equivalent per
        day, using the conversion factor of 6 mcf of natural gas being
        equivalent to one bbl of oil
        billion cubic feet per day
|km                            | Kilometres                                                                                                                                                                               
|CO2e                          | carbon dioxide equivalent                                                                                                                                                                



Boe's may be misleading, particularly if used
in isolation. A boe conversion ratio of 6 mcf of natural gas: 1 bbl of oil is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.



The following table sets forth certain standard
conversions between Standard Imperial Units and the International System of Units (or metric units).



|To convert from |  | To           |  | Multiply by
|--------------- |  | ------------ |  | -----------
|bbls            |  | cubic metres |  | 0.59       
|cubic metres    |  | bbls         |  | 6.293      
|miles           |  | kilometres   |  | 1.609      
|kilometres      |  | miles        |  | 0.621      



- 8 -







NON–GAAP MEASURES



Pembina's Financial Statements, which may be
found on Pembina's profile on the SEDAR website at www.sedar.com, and in Pembina's annual report on Form 40-F filed on Pembina's
profile on the EDGAR website at www.sec.gov, are presented in compliance with International Financial Reporting Standards ("IFRS").
Certain financial information included in such Financial Statements is contained or incorporated by reference within this Annual
Information Form.



Readers should take note, however, that within
this Annual Information Form, terms are used by management to evaluate the performance of Pembina and its businesses that are not
defined by Canadian generally accepted accounting principles ("GAAP"). Since non-GAAP measures do not have a standardized
meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies, securities
regulations require that non-GAAP measures are clearly defined, qualified and reconciled to their nearest GAAP measure. Except
as otherwise indicated, these non-GAAP measures are calculated and disclosed on a consistent basis from period to period. Specific
adjusting items may only be relevant in certain periods.



The intent of non-GAAP measures is to provide
additional useful information with respect to Pembina's operational and financial performance to investors and analysts though
the measures do not have any standardized meaning under IFRS. The measures should not, therefore, be considered in isolation or
used in substitute for measures of performance prepared in accordance with IFRS. Other issuers may calculate these non-GAAP measures
differently.



In particular, in this Annual Information Form,
the terms "net revenue" and "operating margin" are used to describe certain financial information of Pembina.
Readers should be cautioned that net revenue and operating margin are not defined by GAAP and are included in this Annual Information
Form to describe certain financial information of Pembina and should not be construed as alternatives to revenue, earnings, gross
profit, or other measures of financial results determined in accordance with GAAP as indicators of Pembina's performance.



"Net revenue" is a non-GAAP
financial measure which is defined as total revenue less cost of goods sold including product purchases. Management believes that
net revenue provides investors with a single measure to indicate the margin on sales before non-product operating expenses that
is comparable between periods. Management utilizes net revenue to compare consecutive results, particularly in the Midstream business,
to aggregate revenue generated by each of Pembina's businesses and to set comparable objectives.



"Operating margin" is a non-GAAP
financial measure which is defined as gross profit before depreciation and amortization included in operations and unrealized gain/loss
on commodity-related derivative financial instruments. Management believes that operating margin provides useful information to
investors for assessing the financial performance of the Company's operations. Management utilizes operating margin in setting
objectives and views it as a key performance indicator of the Company's success.



For more information with respect to financial
measures which have not been defined by GAAP, including reconciliations to the closest comparable GAAP measure, see the "Non–GAAP
Measures" section of the MD&A, which is incorporated by reference herein.



FORWARD–LOOKING STATEMENTS AND INFORMATION



Certain statements contained in this Annual
Information Form constitute "forward-looking statements" within the meaning of the United States Private Securities
Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities
legislation (collectively, "forward-looking statements"). All forward-looking statements are based on Pembina's
current expectations, estimates, projections, beliefs, judgments and assumptions based on information available at the time the
statement was made and in light of its experience and its perception of historical trends. Forward-looking statements are typically
identified by words such as "anticipate", "continue", "estimate", "expect", "may",
"will", "project", "should", "could", "would", "believe", "plan",
"intend", "design", "target", "undertake", "view", "indicate", "maintain",
"explore", "entail", "schedule", "objective", "strategy", "likely",
"potential", "outlook", "aim", "propose", "goal", and similar expressions suggesting
future events or future performance.



- 9 -







By their nature, such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from
those anticipated in such forward-looking statements. Pembina believes the expectations reflected in those forward-looking statements
are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements
included in this Annual Information Form should not be unduly relied upon. These statements speak only as of the date of the Annual
Information Form.



In particular, this Annual Information Form
contains forward-looking statements pertaining to, among other things, the following:



| | · | the future levels and sustainability of
cash dividends that Pembina intends to pay to its shareholders, the dividend payment dates and the tax treatment thereof;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | planning, construction, capital expenditure
estimates, schedules, regulatory and environmental applications and anticipated approvals, expected capacity, incremental volumes,
in-service dates, rights, activities, benefits and operations with respect to new construction of, or expansions on existing, pipelines,
gas services facilities, fractionation facilities, terminalling, storage and hub facilities and other facilities or energy infrastructure,
as well as the impact of Pembina's new projects on its future financial performance;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | pipeline, processing, fractionation and
storage facility and system operations and throughput levels;
| | - | -----------------------------------------------------------------------------------------------------



| | · | treatment under governmental regulatory
regimes including taxes, environmental and greenhouse gas regulations and related abandonment and reclamation obligations, and
Aboriginal, landowner and other stakeholder consultation requirements;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Pembina's estimates of and strategy for
payment of future abandonment costs and decommissioning obligations, and deferred tax liability;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------



| | · | Pembina's strategy and the development
and expected timing of new business initiatives, growth opportunities and the impact thereof;
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| | · | increased throughput potential, processing
capacity and fractionation capacity due to increased oil and gas industry activity and new connections and other initiatives on
Pembina's pipelines and at Pembina's facilities;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | expected future cash flows and the sufficiency
thereof, financial strength, sources of and access to funds at attractive rates, future contractual obligations, future financing
options, future renewal of credit facilities, availability of capital to fund growth plans, operating obligations and dividends
and the use of proceeds from financings;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | tolls and tariffs, and processing, transportation,
fractionation, storage and services commitments and contracts;
| | - | -----------------------------------------------------------------------------------------------------------------



| | · | operating risks (including the amount
of future liabilities related to pipeline spills and other environmental incidents) and related insurance coverage and inspection
and integrity programs;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | inventory and pricing in the North American
liquids market;
| | - | -----------------------------------------------------------



- 10 -







| | · | the impact of the current commodity price
environment on Pembina; and
| | - | ---------------------------------------------------------------------



| | · | competitive conditions and Pembina's ability
to position itself competitively in the industry.
| | - | ----------------------------------------------------------------------------------------------



Various factors or assumptions are typically
applied by Pembina in drawing conclusions or making the forecasts, projections, predictions or estimations set out in forward-looking
statements based on information currently available to Pembina. These factors and assumptions include, but are not limited to:



| | · | oil and gas industry exploration and development
activity levels and the geographic region of such activity;
| | - | ------------------------------------------------------------------------------------------------------------



| | · | the success of Pembina's operations;
| | - | ------------------------------------



| | · | prevailing commodity prices, interest
rates, tax rates and exchange rates and the ability of Pembina to maintain current credit ratings;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------



| | · | the availability of capital to fund future
capital requirements relating to existing assets and projects;
| | - | ---------------------------------------------------------------------------------------------------------



| | · | expectations regarding participation in
Pembina's DRIP and pension plan;
| | - | ------------------------------------------------------------------------



| | · | future operating costs, including geotechnical
and integrity costs being consistent with historical costs;
| | - | ----------------------------------------------------------------------------------------------------------



| | · | oil and gas industry compensation levels
remaining consistent with historical levels;
| | - | -------------------------------------------------------------------------------------



| | · | in respect of current developments, expansions,
planned capital expenditures, completion dates and capacity expectations: that third parties will provide any necessary support;
that any third-party projects relating to Pembina's growth projects will be sanctioned and completed as expected; that any required
commercial agreements can be reached; that all required regulatory and environmental approvals can be obtained on the necessary
terms in a timely manner; that counterparties will comply with contracts in a timely manner; that there are no unforeseen events
preventing the performance of contracts or the completion of the relevant facilities; and that there are no unforeseen material
costs relating to the facilities which are not recoverable from customers;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | in respect of the stability of Pembina's
dividends: prevailing commodity prices, margins and exchange rates; that Pembina's future results of operations will be consistent
with past performance and management expectations in relation thereto; the continued availability of capital at attractive prices
to fund future capital requirements relating to existing assets and projects, including but not limited to future capital expenditures
relating to expansion, upgrades and maintenance shutdowns; the success of growth projects; future operating costs; that counterparties
to material agreements will continue to perform their obligations in a timely manner; that there are no unforeseen events preventing
the performance of contracts; and that there are no unforeseen material construction or other costs related to current growth projects
or current operations;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | prevailing regulatory, tax and environmental
laws and regulations and tax pool utilization; and
| | - | -----------------------------------------------------------------------------------------------



| | · | the amount of future liabilities relating
to lawsuits and environmental incidents and the availability of coverage under Pembina's insurance policies (including in respect
of Pembina's business interruption insurance policy).
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The actual results of Pembina could differ
materially from those anticipated in these forward-looking statements as a result of the material risk factors set forth below:



- 11 -







| | · | the regulatory environment and decisions,
and Aboriginal and landowner consultation requirements;
| | - | -------------------------------------------------------------------------------------------------



| | · | the impact of competitive entities and
pricing;
| | - | -----------------------------------------------



| | · | labour and material shortages;
| | - | ------------------------------



| | · | reliance on key relationships and agreements
and the outcome of stakeholder engagement;
| | - | ---------------------------------------------------------------------------------------



| | · | the strength and operations of the oil
and natural gas production industry and related commodity prices;
| | - | --------------------------------------------------------------------------------------------------------



| | · | non-performance or default by counterparties
to agreements which Pembina or one or more of its subsidiaries has entered into in respect of its business;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | actions by governmental or regulatory
authorities including changes in tax laws and treatment, changes in royalty rates or increased environmental regulation;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | fluctuations in operating results;
| | - | ----------------------------------



| | · | adverse general economic and market conditions
in Canada, North America and worldwide, including changes, or prolonged weaknesses, as applicable, in interest rates, foreign currency
exchange rates, commodity prices, supply/demand trends and overall industry activity levels;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | constraints on, or the unavailability
of adequate infrastructure;
| | - | -----------------------------------------------------------------



| | · | changes in the political environment,
in North America and elsewhere, and public opinion;
| | - | -----------------------------------------------------------------------------------------



| | · | ability to access various sources of debt
and equity capital;
| | - | -------------------------------------------------------------



| | · | changes in credit ratings;
| | - | --------------------------



| | · | technology and security risks;
| | - | ------------------------------



| | · | natural catastrophes; and
| | - | -------------------------



| | · | other risk factors as set out in this
Annual Information Form under "Risk Factors."
| | - | -----------------------------------------------------------------------------------



These factors should not be construed as exhaustive.
Unless required by law, Pembina does not undertake any obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. Any forward-looking statements contained herein are expressly
qualified by this cautionary statement.



- 12 -







CORPORATE STRUCTURE



Name, Address and Formation



Pembina Pipeline Corporation is a corporation
amalgamated under the ABCA. It is the successor to Pembina Pipeline Income Fund (the "Fund") following the completion
of the reorganization of the Fund from an income trust structure to a corporate structure by way of plan of arrangement involving
the Fund, Pembina and the holders of the Fund's trust units pursuant to which the trust was reorganized into Pembina on October
1, 2010. Pembina's principal and registered office is located at Suite 4000, 585 - 8th Avenue S.W., Calgary, Alberta, T2P 1G1.



Pembina's Subsidiaries



The following chart indicates Pembina's major
subsidiaries, including their jurisdictions of formation and the percentage of common equity or other ownership interest owned,
or controlled or directed, directly or indirectly, by Pembina or its subsidiaries.



|Principal Subsidiaries(1)                | Jurisdiction ofIncorporation/Organization | Ownership
|---------------------------------------- | ----------------------------------------- | ---------
|                                         |                                           |          
|Pembina Pipeline                         | Alberta                                   | 100%     
|Pembina Oil Sands Pipeline L.P.          | Alberta                                   | 100%     
|Pembina Midstream Inc.                   | Alberta                                   | 100%     
|Pembina Midstream Limited Partnership    | Alberta                                   | 100%     
|Pembina Gas Services Limited Partnership | Alberta                                   | 100%     
|Pembina NGL Corporation                  | Alberta                                   | 100%     
|Pembina Facilities NGL LP                | Alberta                                   | 100%     
|Pembina Empress NGL Partnership          | Alberta                                   | 100%     
|Pembina Resource Services Canada         | Alberta                                   | 100%     
|Pembina Infrastructure and Logistics LP  | Alberta                                   | 100%     
|Pembina Prairie Facilities Ltd.          | Alberta                                   | 100%     
|Pembina Resource Services (U.S.A.)       | Michigan, US                              | 100%     



| | (1) | Subsidiaries are omitted where, at Pembina's most recent financial year-end: (i) the total assets
of the subsidiary do not exceed 10 percent of Pembina's consolidated assets; (ii) the revenue of the subsidiary does not exceed
10 percent of Pembina's consolidated revenue; and (iii) the conditions in (i) and (ii) would be satisfied if the omitted subsidiaries
were aggregated, and the reference in (i) and (ii) changed from 10 percent to 20 percent.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Amended Articles



On May 13, 2013, Pembina filed articles of
amendment under the ABCA to create a new class of shares, the Class A Preferred Shares, to change the designation and terms of
the Class B Preferred Shares, and to increase the maximum number of directors of Pembina from eleven to thirteen, after receiving
Shareholder approval for such amendments. On July 22, 2013, Pembina filed articles of amendment under the ABCA to create the Series
1 and Series 2 Class A Preferred Shares. On September 30, 2013, Pembina filed articles of amendment under the ABCA to create the
Series 3 and Series 4 Class A Preferred Shares. On January 9, 2014 Pembina filed articles of amendment under the ABCA to create
the Series 5 and Series 6 Class A Preferred Shares. On September 4, 2014 Pembina filed articles of amendment under the ABCA to
create the Series 7 and Series 8 Class A Preferred Shares. On April 8, 2015 Pembina filed articles of amendment under the ABCA
to create the Series 9 and Series 10 Class A Preferred Shares.



- 13 -







On October 1, 2015, Pembina filed articles
of amalgamation under the ABCA to effect a vertical short form amalgamation with its wholly owned subsidiary Alberta Oil Sands
Pipeline Ltd. as part of an internal reorganization.



On January 14, 2016, Pembina filed articles
of amendment under the ABCA to create the Series 11 and Series 12 Class A Preferred Shares. On April 20, 2016, Pembina filed articles
of amendment under the ABCA to create the Series 13 and Series 14 Class A Preferred Shares.



GENERAL DEVELOPMENTS OF PEMBINA



During the three-year period ending on December
31, 2016 and 2017 year-to-date, Pembina continued to execute its business plan and advance its growth strategy as discussed below.



Developments in 2014



|January 1    |  | Bob Michaleski, Pembina's former President and Chief Executive Officer, retired effective December 31, 2013 and Mick Dilger, formerly President and Chief Operating Officer, assumed the role of Chief Executive Officer effective January 1, 2014 and also joined Pembina's Board of Directors.                                                                                                                                                                                 
|------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|January 16   |  | Pembina completed a bought deal offering of 10,000,000 Series 5 Class A Preferred Shares at a price of $25.00 per Series 5 Class A Preferred Share pursuant to a prospectus supplement dated January 9, 2014 under its 2013 Base Shelf Prospectus, for aggregate gross proceeds of $250 million. See "Description of the Capital Structure of Pembina – Class A Preferred Shares."                                                                                               
|             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|February 26  |  | Pembina announced that the Chairman of the Board, Lorne Gordon, would step down from his role as Chairman, while remaining a director, effective April 1, 2014 and that Randall Findlay would assume the role of Chairman of the Board effective the same day.                                                                                                                                                                                                                   
|             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|April        |  | Pembina was added to the S&P/TSX 60.                                                                                                                                                                                                                                                                                                                                                                                                                                             
|             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|April 4      |  | Pembina issued and sold $600 million aggregate principal amount of Medium Term Notes, Series 4 pursuant to a pricing supplement under its 2013 Base Shelf Prospectus as supplemented by a prospectus supplement thereto dated April 1, 2014. See "Description of the Capital Structure of Pembina – Medium Term Notes."                                                                                                                                                          
|             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|May          |  | Pembina announced that it had reached binding commercial agreements to proceed with constructing RFS III.                                                                                                                                                                                                                                                                                                                                                                        
|             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|August 6     |  | Pembina placed a pipeline expansion between Simonette and Fox Creek into service.                                                                                                                                                                                                                                                                                                                                                                                                
|             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|September 10 |  | Pembina announced plans to expand its previously announced Phase III Expansion by constructing a new 16" diameter pipeline from Fox Creek, Alberta into Namao, Alberta and a new 12" diameter pipeline from Wapiti, Alberta into Kakwa. Pembina has since increased the size of the Wapiti to Kakwa pipeline from a 12" to a 16" diameter pipeline. The total expected capital cost for the Phase III Expansion is $2.4 billion, with an anticipated in service date of mid-2017.
|             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|September 11 |  | Pembina completed a bought deal offering of 10,000,000 Series 7 Class A Preferred Shares at a price of $25.00 per Series 7 Class A Preferred Share pursuant to a prospectus supplement dated September 4, 2014 under its 2013 Base Shelf Prospectus, for aggregate gross proceeds of $250 million. See "Description of the Capital Structure of Pembina – Class A Preferred Shares."                                                                                             



- 14 -







|September 30 |  | Pembina announced that Thomas W. Buchanan had tendered his resignation from Pembina's Board of Directors.                                                                                                                                                                                                                                                                                 
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|             |  |                                                                                                                                                                                                                                                                                                                                                                                           
|October 6    |  | Pembina placed the initial 200 MMcf/d (gross) Resthaven gas processing facility into service.                                                                                                                                                                                                                                                                                             
|             |  |                                                                                                                                                                                                                                                                                                                                                                                           
|October 7    |  | Pembina announced that Anne-Marie Ainsworth had been appointed to Pembina's Board of Directors.                                                                                                                                                                                                                                                                                           
|             |  |                                                                                                                                                                                                                                                                                                                                                                                           
|October 9    |  | Pembina announced plans to proceed with construction of the Canadian Diluent Hub.                                                                                                                                                                                                                                                                                                         
|             |  |                                                                                                                                                                                                                                                                                                                                                                                           
|October 10   |  | Pembina announced that it had entered into commercial agreements to proceed with a 100 MMcf/d (gross) expansion of the Company's initial Resthaven gas processing facility and to build, own and operate a gas gathering pipeline that would deliver gas into Resthaven (the "Resthaven Expansion").                                                                                      
|             |  |                                                                                                                                                                                                                                                                                                                                                                                           
|October 24   |  | Pembina announced that it had closed the acquisition of the Vantage Pipeline and Mistral Midstream Inc.'s interest in SEEP, through the acquisition of all of the equity interests of Vantage Pipeline Canada ULC, Vantage Pipeline US LP and Mistral Midstream Inc. (the "Vantage Acquisition").                                                                                         
|             |  |                                                                                                                                                                                                                                                                                                                                                                                           
|November 11  |  | Pembina announced that it had entered into binding agreements to proceed with an expansion to its pipeline infrastructure in northeast British Columbia (the "NEBC Expansion"), which will transport condensate and NGL for various producers in the Montney resource play, at an expected capital cost of $235 million.  Pembina expects to bring the pipeline into service in late 2017.
|             |  |                                                                                                                                                                                                                                                                                                                                                                                           
|November 27  |  | Pembina announced plans to construct a new facility and expand its gas processing capacity near its existing Musreau I and Musreau II facilities by 100 MMcf/d ("Musreau III").                                                                                                                                                                                                           
|             |  |                                                                                                                                                                                                                                                                                                                                                                                           
|December 17  |  | Pembina placed the Musreau II facility into service, ahead of the previously scheduled in-service date of first quarter 2015.                                                                                                                                                                                                                                                             



Developments in 2015



|January 1  |  | Peter Robertson, Pembina's former Senior Vice President and Chief Financial Officer, retired effective December 31, 2014 and Scott Burrows was promoted to the position of Vice President, Finance and Chief Financial Officer effective January 1, 2015.
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|           |  |                                                                                                                                                                                                                                                          
|January 15 |  | Pembina announced that Gordon J. Kerr had been appointed to Pembina's Board of Directors.                                                                                                                                                                



- 15 -







|February 2  |  | Pembina issued and sold $450 million aggregate principal amount of Medium Term Notes, Series 5 and $150 million aggregate principal amount of its Medium Term Notes, Series 3, through a re-opening, pursuant to two pricing supplements dated January 28, 2015 under its 2013 Base Shelf Prospectus as supplemented by a prospectus supplement thereto dated April 24, 2013. See "Description of the Capital Structure of Pembina – Medium Term Notes."
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|April 10    |  | Pembina completed a bought deal offering of 9,000,000 Series 9 Class A Preferred Shares at a price of $25.00 per Series 9 Class A Preferred Sharepursuant to a prospectus supplement dated April 2, 2015 under its 2015 Base Shelf Prospectus, for aggregate gross proceeds of $225 million. See "Description of the Capital Structure of Pembina – Class A Preferred Shares."                                                                          
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|April 27    |  | Pembina announced that it had placed its Phase II LVP Expansion into service, which added an
    incremental 55 mbpd to the Company’s Peace Pipeline system, bringing total capacity on this line to over 250 mbpd.                                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|May 5       |  | Pembina announced that its Board of Directors approved a 5.2 percent increase in its monthly Common Share dividend rate from $0.145 per Common Share to $0.1525 per Common Share.                                                                                                                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|May 21      |  | Pembina announced that it would provide terminalling services for the North West Redwater
    Partnership with respect to the partnership's planned refinery under a 30-year fixed return agreement and a 10-year NGL mix
    purchase and sale agreement related to RFS III.                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|May 21      |  | Pembina announced it had entered into agreements to construct a new pipeline lateral in the
    Karr area of Alberta with expected capacity of approximately 30 mbpd.                                                                                                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|June 16     |  | Pembina issued and sold $600 million aggregate principal amount of Medium Term Notes, Series 6 and $100 million aggregate principal amount of its Medium Term Notes, Series 3, through a re-opening, pursuant to two pricing supplements dated June 11, 2015 under its 2015 Base Shelf Prospectus. See "Description of the Capital Structure of Pembina – Medium Term Notes."                                                                           
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|September 2 |  | Pembina announced the commissioning of Saturn II, SEEP, the gathering pipeline associated with the Resthaven Expansion, as well as the Phase II HVP Expansion.                                                                                                                                                                                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|October 13  |  | Pembina completed the redemption of the outstanding principal amount of its Series C and Series E Convertible Debentures (the "Redemption"). Pembina elected to satisfy the Redemption price of both series of debentures through the issuance of Common Shares.                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|November 5  |  | Pembina announced plans to construct, own and operate a new 100 MMcf/d shallow cut gas plant ("Duvernay I") at an expected capital cost of $125 million, and with an expected in service date in the fourth quarter of 2017.                                                                                                                                                                                                                            
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|November 19 |  | Pembina completed a bought deal offering of 15,335,250 Common Shares at a price of $30.00 per Common Share pursuant to a prospectus supplement dated November 12, 2015 under its 2015 Base Shelf Prospectus, for aggregate gross proceeds of approximately $460 million.                                                                                                                                                                                



- 16 -







Developments in 2016



|January 7   |  | Pembina announced certain amendments to its DRIP.  The amendments allowed Pembina's Board of Directors to set the discount under the regular dividend reinvestment component of the DRIP at a rate of up to five percent of the Average Market Price (as defined in the DRIP). The amendments also include a reduction of the premium to the regular cash dividend paid to Shareholders who participate in the Premium DividendTM component of the DRIP from 102 percent to 101 percent.                                                                                                                                                                                            
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|January 15  |  | Pembina completed a bought deal offering of 6,800,000 Series 11 Class A Preferred Shares at a price of $25.00 per Series 11 Class A Preferred Share pursuant to a prospectus supplement dated January 8, 2016 under its 2015 Base Shelf Prospectus, for aggregate gross proceeds of $170 million. Pembina used the net proceeds from the sale of Series 11 Class A Preferred Shares to reduce the indebtedness of the Company under its then-current credit facilities as well as for capital expenditures and working capital requirements in connection with the Company's 2016 capital program. See "Description of the Capital Structure of Pembina – Class A Preferred Shares."
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|February 25 |  | Pembina announced that it had entered into agreements for the construction of a new pipeline lateral in the Altares area of British Columbia which will transport production from the Montney resource play and will connect into Pembina's NEBC Expansion.                                                                                                                                                                                                                                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|March 17    |  | Pembina announced that its Board of Directors approved a 4.9 percent increase in its monthly Common Share dividend rate from $0.1525 per Common Share to $0.16 per Common Share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|March 29    |  | Pembina completed a bought deal offering of 15,335,250 Common Shares at a price of $30.00 per Common Share pursuant to a prospectus supplement dated March 18, 2016 under its 2015 Base Shelf Prospectus, for aggregate gross proceeds of approximately $345 million. Pembina used the net proceeds from sale of the Common Shares to partially finance the acquisition of gas processing assets.                                                                                                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|March       |  | Pembina commissioned three new storage tanks at its Edmonton North Terminal, which provide a total of 550,000 barrels of additional crude oil storage capacity, more than doubling the total capacity of the Edmonton North Terminal.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|April       |  | Pembina commissioned RFS II.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|April       |  | Pembina completed and placed into service Musreau III.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|April 6     |  | Pembina announced that it had exercised $500 million of Pembina's accordion feature under its $2 billion revolving unsecured credit facility, increasing the funds available under Pembina's Credit Facility to $2.5 billion.                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|April 11    |  | Pembina announced a joint feasibility study with Petrochemical Industries Company K.S.C., a subsidiary of the Kuwait Petroleum Corporation, for the evaluation of a world-scale combined propane dehydrogenation and polypropylene upgrading facility in Alberta.                                                                                                                                                                                                                                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|April 20    |  | Pembina announced the completion of its acquisition of sour natural gas processing assets in the Kakwa area of Alberta. The acquired assets included a recently constructed Kakwa sour natural gas processing complex and associated infrastructure (the "Kakwa River Facility"); and preliminary engineering studies, licenses and surface rights for the future construction of a sour natural gas processing facility.                                                                                                                                                                                                                                                           



- 17 -







|April 21   |  | Pembina announced that the Company had received approval from the AER relating to the construction of two 270 km, 24" and 16" pipelines between Fox Creek and Namao, Alberta, as part of the Phase III Expansion.                                                                                                                                                                                                                                                                                                                                                
|---------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|April 27   |  | Pembina completed a bought deal offering of 10,000,000 Series 13 Class A Preferred Shares at a price of $25.00 per Series 13 Class A Preferred Share pursuant to a prospectus supplement dated April 18, 2016 under its 2015 Base Shelf Prospectus, for aggregate gross proceeds of $250 million. Pembina used the net proceeds from the sale of the Series 13 Class A Preferred Shares for capital expenditures and to reduce its indebtedness under the Credit Facilities. See "Description of the Capital Structure of Pembina – Class A Preferred Shares."   
|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|May        |  | Pembina completed and placed into service the Resthaven Expansion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|May 31     |  | Pembina announced that it had entered into agreements related to constructing associated infrastructure relating to Duvernay I, including condensate, gas and water field handling, a gas gathering trunk line and a fuel line, at an expected capital cost of $145 million, and with an expected in service date in the fourth quarter of 2017.                                                                                                                                                                                                                 
|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|August 11  |  | Pembina issued and sold $500 million aggregate principal amount of Medium Term Notes, Series
    7 pursuant to a pricing supplement dated August 8, 2016 under its 2015 Base Shelf Prospectus, as supplemented by a prospectus
    supplement thereto dated June 11, 2015. Pembina used the net proceeds from the sale of the Medium Term Notes, Series 7 to
    repay short-term debt, as well as to fund Pembina’s
    capital program and for other general corporate purposes. See "Description of the Capital Structure of Pembina –
    Medium Term Notes."
|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|November   |  | Pembina announced that it had completed the expansion of the Vantage Pipeline and the Horizon Expansion, increasing Vantage's mainline capacity from 40 mbpd to approximately 68 mbpd through the addition of mainline pump stations and the construction of a new 80 km, 8" gathering lateral (the "Vantage Expansion"), and increasing the capacity on the Horizon Pipeline to 250 mbpd through the upgrading of mainline pump stations and other facility modifications (the "Horizon Expansion").                                                            
|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|December 5 |  | Pembina announced its capital spending plan of approximately $1.9 billion for 2017, directed mainly at multi-year execution projects and long-term value creation.                                                                                                                                                                                                                                                                                                                                                                                               
|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|December 5 |  | Pembina's previously announced proposed propane dehydrogenation and polypropylene upgrading
    facility was conditionally awarded $300 million in royalty credits from the Alberta Government’s
    Petrochemicals     Diversification Program.                                                                                                                                                                                                                                                                                                                 



2017 Year to Date Developments



|January 5  |  | Pembina announced that it had received regulatory approval for and initiated construction on the NEBC Expansion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|---------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|January 20 |  | Pembina issued and sold $300 million aggregate principal amount of Medium Term Notes, Series 8 and $300 million aggregate principal amount of Medium Term Notes, Series 9 pursuant to two pricing supplements dated January 17, 2017 under its 2015 Base Shelf Prospectus, as supplemented by a prospectus supplement thereto dated June 11, 2015. Pembina used the net proceeds from the sale of the Medium Term Notes, Series 8 and Series 9 to repay short-term debt, as well as to fund Pembina's capital program and other general corporate purposes. See "Description of the Capital Structure of Pembina – Medium Term Notes".



- 18 -







|February 16 |  | Pembina announced that it entered
        into a 20-year infrastructure development and service agreement (the "Agreement") with Chevron Canada Limited
        ("Chevron"). The Agreement includes an area of dedication by Chevron, in the Duvernay resource play near Fox Creek,
        Alberta. Under the Agreement and subject to Chevron sanctioning development in the region, Chevron has the right to require Pembina
        to construct, own and operate gas gathering pipelines and processing facilities, liquids stabilization facilities and other supporting
        infrastructure for the area of dedication, together with Pembina providing long-term service for Chevron on its pipelines and fractionation
        facilities.  In aggregate, and subject to internal Chevron and regulatory approvals, the infrastructure developed over the
        term of this Agreement has the potential to represent a multi-billion dollar investment by Pembina.  While this agreement
        and respective obligations of the parties are binding, infrastructure development remains contingent upon Chevron sanctioning,
        as well as necessary environmental and regulatory approvals.
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 19 -







DESCRIPTION OF PEMBINA'S BUSINESS AND OPERATIONS



Pembina's Business Objective and Strategy



Pembina is committed to working with its community
and aboriginal neighbours while providing value for investors in a safe and environmentally responsible manner. This balanced approach
to operating ensures the trust Pembina builds among all of its stakeholders is sustainable over the long term. Pembina's goal is
to provide highly competitive and reliable returns to investors through monthly dividends on its Common Shares while enhancing
the long-term value of its securities. To achieve this, Pembina's strategy is to:



| | · | Preserve value by providing safe, responsible,
cost-effective and reliable services.
| | - | ------------------------------------------------------------------------------------



| | · | Diversify Pembina's asset base along the
hydrocarbon value chain by providing integrated service offerings which enhance profitability.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



| | · | Pursue projects or assets that are expected
to generate increased cash flow per share and capture long-life, economic hydrocarbon reserves.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



| | · | Maintain a strong balance sheet through
the application of prudent financial management to all business decisions.
| | - | ------------------------------------------------------------------------------------------------------------------



Overview of Pembina's Business



There are three general sectors in the oil
and gas industry: "upstream", "midstream" and "downstream." The upstream sector encompasses exploration
for and production of hydrocarbon liquids in their raw forms. In the midstream sector, hydrocarbon products are gathered, processed,
transported and marketed to the downstream sector. The downstream sector consists of refiners, end-use customers, local distributers
and wholesalers.



Pembina is a leading transportation and midstream
service provider that has been serving North America's energy industry for over 60 years. Pembina owns and operates an integrated
system of pipelines that transport various products derived from natural gas and hydrocarbon liquids produced primarily in western
Canada. The Company also owns and operates gas gathering and processing facilities and an oil and NGL infrastructure
and logistics business. Pembina's integrated assets and commercial operations along the majority of the hydrocarbon value chain
allow it to offer a full spectrum of midstream and marketing services to the energy sector. Pembina is committed to working with
its community and aboriginal neighbours, while providing value for investors in a safe, environmentally responsible manner. This
balanced approach to operating ensures the trust Pembina builds among all of its stakeholders is sustainable over the long term.
The business segments of Pembina are grouped for functional, geographic and accounting purposes into four categories, described
in their respective sections: Conventional Pipelines; Oil Sands & Heavy Oil; Gas Services; and Midstream.



- 20 -











Operations Overview



The above map illustrates Pembina's assets:







- 21 -







The net revenue contribution from each of Pembina's four businesses in 2016 was divided as follows:







The following table sets forth certain financial and operating highlights for 2016, 2015 and 2014.







Financial and Operating Highlights

(in $ millions unless otherwise noted)











|                                                                           |  | Conventional Pipelines |     |     | Oil Sands & Heavy Oil |  |     | Gas Services(3) |  |  | Midstream(4) |     |  | Total(6) |    
|-------------------------------------------------------------------------- |  | ---------------------- | --- | --- | --------------------- |  | --- | --------------- |  |  | ------------ | --- |  | -------- | ---
|                                                                           |  | 2016                   |     |     | 2015                  |  |     | 2014            |  |  | 2016         |     |  | 2015     |    
|Average revenue volumes (mbpd, except as otherwise indicated)              |  |                        | 650 | (1) |                       |  | 614 | (1)             |  |  | 575          | (1) |  |          | 975
|Revenue                                                                    |  |                        | 719 |     |                       |  | 628 |                 |  |  | 513          |     |  |          | 202
|Net Revenue(2)                                                             |  |                        | 719 |     |                       |  | 628 |                 |  |  | 513          |     |  |          | 202
|Operating expenses                                                         |  |                        | 222 |     |                       |  | 224 |                 |  |  | 211          |     |  |          | 62 
|Realized loss (gain) on commodity-related derivative financial instruments |  |                        | 3   |     |                       |  | 3   |                 |  |  |              |     |  |          |    
|Operating margin(2)                                                        |  |                        | 494 |     |                       |  | 401 |                 |  |  | 302          |     |  |          | 140









Notes:

| | (1) | Revenue volumes are equal to contracted plus interruptible
volumes.
| | --- | -------------------------------------------------------------------

| | (2) | See "Non–GAAP Measures."
| | --- | ------------------------

| | (3) | Gas Services net revenue is net of $12 million in cost of goods sold, net of product purchases
for 2016 (2015: $1 million; 2014: $nil).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Midstream net revenue is net of $2,611 million in cost of goods sold, net of product purchases
for 2016 (2015: $3,232 million; 2014: $4,672 million). Average volume in Midstream represents NGL sales volumes.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | Average volume for Gas Services is in mboe/d, which is converted from MMcf/d at a ratio of 6:1.
Average MMcf/d processed in 2016 was 836 MMcf/d (2015: 656MMcf/d; 2014:
515 MMcf/d).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (6) | Not including corporate and intersegment eliminations – see Operating Segments note in the
Financial Statements.
| | --- | ----------------------------------------------------------------------------------------------------------------



Further discussion of operational results and
new developments and outlook for Pembina's four business segments for the years ended December 31, 2016 and 2015 is contained in
the section "Operating Results" in the MD&A, which section is incorporated by reference herein.



- 22 -







Conventional Pipelines Business



Overview



Pembina's Conventional Pipelines business
comprises a strategically located pipeline network of more than 10,000 km, inclusive of expansion projects discussed herein
that are currently under development. This network transports hydrocarbon liquids and extends across much of Alberta and
parts of British Columbia, Saskatchewan and North Dakota. The primary objectives of this business are to provide safe,
responsible, reliable and cost effective transportation services for customers, pursue opportunities for
increased throughput, and maintain and/or grow sustainable operating margin on invested capital by capturing incremental
volumes, expanding Pembina's pipeline systems, managing revenue and following a disciplined approach to its operating
expenses.



Major Customers



There are approximately 50 shippers (including
many major shippers of petroleum products in western Canada) on the conventional pipeline systems owned and operated by Pembina.
The primary delivery points for hydrocarbon products include the Enbridge Pipeline systems for multiple products; the Kinder Morgan
North 40 terminal and the Trans Mountain pipeline system at Edmonton, Alberta; the Strathcona refinery in the Edmonton area; Pembina's
CDH near Fort Saskatchewan; the Husky Energy Prince George refinery; the Alberta Ethane Gathering System near Empress, Alberta
and all major NGL fractionators near Fort Saskatchewan, Alberta.



Contractual Arrangements



The contracts within Pembina's Conventional
Pipelines business are fee-for-service in nature, but vary in their structure as follows:



Non-Firm Contracts



Capacity within the Conventional Pipelines
business that has not been secured under the "Firm Contracting" structure described below is contracted under
fee-for-service, evergreen-style, month-to-month contracts on an interruptible basis that allow Pembina to adjust tolls for actual
volumes, operating expenses and capital expenditures on a periodic basis. These contracts do not require Pembina to guarantee a
specified amount of dedicated pipeline capacity for a customer. Rather, customers nominate volumes on a monthly basis and tariffs
are set periodically by receipt point.



Many of Pembina's B.C. Pipelines are operated
under a cost-of-service methodology which is reviewed annually and/or semi-annually whereby Pembina is able to flow through the
actual operating costs of the systems to shippers while recovering an acceptable return on invested capital; however, there is
typically no firm volume commitment under these long-term, cost-of-service agreements as would be typical in a cost-of-service
agreement.



Firm Contracting



Since 2012, Pembina has focused on securing
base volumes on its Peace, Northern and Vantage Pipeline systems under a firm contract structure, where a fee-for-service toll
(which includes flow-through operating costs for power and extraordinary events) is set under the contract and customers receive
a firm amount of pipeline capacity for the transportation of their product. Under firm contracts, customers also agree to a minimum
volume or revenue commitment ("take-or-pay"). Through this process, the significant majority of crude oil, condensate
and NGL product transported on the Peace, Northern and Vantage Pipeline systems is contracted under long-term, take-or-pay agreements
that provide customers with firm-service in exchange for a minimum revenue requirement. Due to substantial customer demand for
additional capacity, Pembina announced its Phase III Expansion and subsequent upsize in 2013 and 2014, respectively. In the second
half of 2014, due to customer demand, Pembina converted a significant majority of the existing and expansion capacity for crude
oil, condensate and NGL on the Peace Pipeline system to firm-service, take-or-pay agreements. The Phase III Expansion is backstopped
by firm-service agreements with a substantial take-or-pay component and have a ten year average term.



- 23 -







Competitive Environment



Competition among existing crude oil, condensate
and NGL pipelines is based primarily on the cost of transportation, access to supply, the quality and reliability of service, contract
carrier alternatives, and proximity and access to markets.



Pembina's Conventional Pipelines are feeder
pipelines that move products in the field, from batteries, processing facilities and storage tanks, to markets and export pipelines
primarily in the Edmonton and Fort Saskatchewan, Alberta, area. Given that the majority of Pembina's pipelines in its Conventional
Pipelines business are connected to existing oil batteries and infrastructure, existing volumes generally remain connected to the
pipeline system until it is uneconomical to provide pipeline transportation services, usually due to low volume, in which case
the connection may be discontinued and the producer may truck volumes to an alternate delivery point. With Pembina's track
record of safe, reliable and cost-effective operations, service tenure, the complex nature of its systems and high levels of customer
service, it is difficult for a competitor to replicate the high-value service offering that Pembina provides. Pembina's Phase III
Expansion contracting process illustrated that customers are satisfied with Pembina's service offering as those customers contracted
on a long-term basis with Pembina though there was significant competition for the project.



Unlike connected facilities, unconnected volumes
of product are typically trucked to the most cost-effective truck unloading facility, and there is direct competition from numerous
service providers serving the same area. Most volumes that are trucked are either from locations that are too far away to obtain
economic pipeline service or have volumes too small to make a pipeline connection economically viable. Typically, a producer's
selection of a truck terminal is only partially based on tolls; often it is also based on whether the volumes need some form of
treatment to meet pipeline specifications, as well as arbitrage opportunities associated with the product. Pembina owns fourteen
truck terminals (these form part of the Midstream business) to assist in aggregating unconnected volumes onto its systems. There
are several other pipelines and terminal operators which compete for trucked volumes in Pembina's operating areas. Competition
for these volumes include the Alliance Pipeline and local market fractionators for NGL's, as well as the Rangeland and Rainbow
pipelines, rail and numerous other pipelines connected to terminal operations for crude oil and condensate.



Producer activity focused on NGL development
continues in the Deep Basin Cretaceous, Montney and Duvernay resource areas served by Pembina's Peace and Northern Pipelines. Pembina
has successfully been able to leverage its existing assets to provide incremental new capacity in these areas, as evidenced by
Pembina's numerous pipeline expansion projects, which are underpinned by long-term, fee-for-service contracts with area producers.
These fee-based contracts are only exposed to volume fluctuations above take-or-pay commitments, thus providing very stable cash
flow. There is no direct commodity price exposure associated with this type of contract.



A delay in the development of downstream processing,
transportation and end-user facilities may also impact the future development and profitability of Pembina's Conventional Pipeline
systems. The Edmonton, Alberta area NGL fractionation capacity may need to be expanded beyond current contracted volumes to process
any potential forecasted incremental NGL volumes.



Other Information – Industry Regulations



The feeder pipeline industry in Alberta is
regulated by the AER on a complaints basis. Once a permit to construct the pipeline is issued by the AER, subject to the licensing
of operational matters or a common carrier declaration, the pipeline is free to establish tolls in a competitive environment. Tolls
are established under contracts of varying terms and conditions and are also posted by location for non-firm (interruptible) service.
Posted tolls which are applied to non-firm volumes can generally be adjusted to respond to changing volumes, costs and market circumstances.
Contracted tolls on firm contracts can also be adjusted, where permitted by the terms of the contract, for such things as changes
in power costs, extraordinary natural events that impact pipeline integrity and changes to regulations associated with pipelines.
Pipeline customers have recourse to the AER, with respect to pipeline access and discrimination among customers. Tolls for all
of Pembina's Conventional Pipelines are generally established to recover all costs and earn a reasonable rate of return on the
investment. Over the past 10 years, Pembina is not aware of any toll complaints relating to the Company's systems.



- 24 -







The tolls on the majority of the B.C. Pipelines
are regulated by the BCUC. The BCUC approves tolls that may be charged by common carriers and regulates other tolls on a complaints
basis.



Pipeline companies which own and/or operate
interprovincial or international pipelines fall under the NEB's jurisdiction. Certain pipelines owned by Pembina's subsidiary,
Pouce Coupé Pipe Line Ltd., including the Northwest Pipeline, the Taylor-to-Belloy section of the Northern Pipeline and
the Pouce Coupé Pipeline, are regulated by the NEB. Additionally, Pembina's Taylor to Boundary Lake Pipeline owned by Pembina
Energy Services Inc. and Pembina's Vantage Pipeline system, which is owned by Pembina Prairie Facilities Ltd., a wholly-owned
subsidiary of Pembina, are also regulated by the NEB.



Under NEB regulations, pipeline systems are
divided into two groups. Group 1 consists of the major pipeline companies which are subject to ongoing regulatory oversight by
the NEB. The other pipeline companies under the jurisdiction of the NEB, not included in Group 1, have been classified as Group
2. Each of Pembina's three subsidiaries that own NEB regulated pipelines are regulated as a Group 2 company by the NEB. For these
pipeline systems, the NEB only reviews the tariffs if a customer files a formal complaint concerning the tariffs. There have been
no complaints to the NEB about tariffs on these systems for as long as Pembina has owned and operated them.



Pembina is also subject to requirements relating
to pipeline abandonment on its NEB regulated pipelines. According to the NEB Reasons for Decision RH-2-2008, which set out the
guiding principles and considerations that would be used to set aside funds for pipeline abandonment for pipelines under the NEB's
jurisdiction, a five-year action plan for NEB-regulated companies to follow was established. During this five-year period, the
NEB issued Hearing Order MH-001-2013 to convene an oral public hearing to consider NEB regulated companies' proposals on how to
collect abandonment funds and the mechanisms proposed for abandonment fund collection.



In May, 2014, the NEB issued its MH-001-2013
Reasons for Decision which set out that by January 1, 2015, all NEB-regulated companies must have a set-aside mechanism in place
to begin accumulating funds to pay for pipeline abandonment. The Northwest Pipeline, Northern Pipeline and Pouce Coupé Pipeline's
proposed abandonment fund trust agreements were approved on December 10, 2014, and Pembina filed letters of credit to secure abandonment
funds for each of the Taylor to Boundary Lake Pipelineand the Vantage Pipeline on December
23, 2014.



Approximately 72 percent of Pembina's Conventional
Pipeline's business is subject to AER jurisdiction, 17 percent is subject to the BCOGC jurisdiction, nine percent is subject to
the NEB jurisdiction and two percent is subject to other jurisdictions.



In October 2016, regulations with respect to
the Pipeline Safety Act, specifically Financial Requirements Respecting Pipelines were pre-published in the Canada
Gazette, Part I.Pembina anticipates it will be required to maintain financial resources of a minimum of $300 million to meet
the absolute liability limit requirements in the Act.  The Company will also be required to have readily accessible funds
of at least 5 percent of the absolute liability limit.  The NEB can order the Company to maintain these financial resources
and readily accessible funds in specific types of financial instruments.    Further analysis and clarification is
being sought on the Pipeline Safety Act to determine the impact on Pembina when the regulations come into force.



- 25 -







See
"Risk Factors – Risks Inherent in Pembina's Business – Abandonment Costs", "Risk Factors
– Risks Inherent to Pembina's Business – Environmental Costs and Liabilities" and "Risk Factors –
Risks Inherent to Pembina's Business – Regulation and Legislation."



Oil Sands & Heavy Oil Business



Overview



Pembina plays an important role in supporting
Alberta's oil sands and heavy oil industry. Pembina is the sole transporter of synthetic crude oil for the Syncrude Project (via
the Syncrude Pipeline) and the Horizon Project (via the Horizon Pipeline) to delivery points near Edmonton, Alberta. Pembina also
owns and operates the Nipisi and Mitsue Pipelines, which provide transportation for producers operating in the Pelican Lake and
Peace River heavy oil regions of Alberta and the Cheecham Lateral, which transports synthetic crude to oil sands producers operating
southeast of Fort McMurray, Alberta. Pembina's Oil Sands & Heavy Oil business operates approximately 1,650 km of pipeline and
has approximately 975 mbpd of capacity, under long-term, extendible contracts, which provide for the flow-through of eligible operating
expenses to customers. As a result, operating margin from this business is primarily driven by the amount of capital invested and
is predominantly not sensitive to fluctuations in operating expenses or actual throughput.



Major Customers



The major shippers on Pembina's oil sands,
heavy oil and diluent pipelines are large upstream exploration and production companies. Pembina's oil sands and heavy oil pipelines
provide dedicated service under long-term contracts.



Contractual Arrangements



Pembina's Syncrude Pipeline has a capacity
of 389 mbpd and is fully contracted under a cost-of-service, extendable, long-term agreement that expires no earlier than the end
of 2035.



Pembina's Cheecham Lateral has a capacity of
230 mbpd and is fully contracted to shippers under the terms of a 25-year fixed return extendable agreement that expires in 2032.



The Horizon Pipeline is fully contracted to
a single customer and has a capacity of up to 250 mbpd. The Horizon Pipeline is operated under the terms of a 25-year fixed return
contract, which extends to 2034.



The Nipisi and Mitsue Pipelines have a contracted
capacity of 106 mbpd and are contracted under 10-year fee-for-service agreements, with substantial take-or-pay components, which
commenced in 2011. These contracts also have extension and expansion rights.



Competitive Environment



While regional delivery infrastructure capacity
is sufficient for current production levels, the primary focus of infrastructure development is expected to be on accessing markets
outside of Alberta for the majority of bitumen and heavy oil blend produced in Alberta. In the long term, expansions of existing
condensate and synthetic crude diluent supply infrastructure as well as blended bitumen and heavy oil pipeline delivery systems
will be required depending on the rate at which oil sands and heavy oil may be produced in the future. See "Risk Factors
– Reserve Replacement, Throughput and Product Demand."



Given the long-term nature of oil sands and
heavy oil investments, most pipelines serving existing production are underpinned by long-term transportation agreements. Competition
primarily arises with respect to incremental supply that requires additional pipeline capacity. In some cases, existing pipeline
companies have under-utilized assets which can be re-purposed to suit a customer's needs, giving them a competitive advantage when
competing for new projects. In other cases, where construction of significant new infrastructure is required, pipeline companies
compete for these opportunities based primarily on their operating expertise, cost of capital and commercial flexibility.



- 26 -







Gas Services Business



Overview



Pembina's operations include a growing
natural gas gathering and processing business, which is strategically positioned in an active condensate and NGL-rich area of
the WCSB and integrated with Pembina's other businesses. Pembina's Gas Services business provides gas gathering, compression,
condensate stabilization, and both shallow and deep cut processing services for its customers, primarily on a fee-for-service
basis under long-term contracts. The condensate and NGL extracted through the facilities in this business are transported
by Pembina's Conventional Pipelines business on its Peace and Vantage pipeline systems. A portion of the volumes are further
processed at Pembina's fractionation facilities. Operating assets within Gas Services include:



| | · | Pembina's Cutbank Complex (the
                                                                                                               "Cutbank Complex") – located near Grande Prairie, Alberta, this facility includes six shallow cut
                                                                                                               processing plants (the Cutbank Gas Plant, Musreau I, Musreau II, Musreau III, the Kakwa Gas Plant and the Kakwa River
                                                                                                               Facility, which includes integrated deep cut processing capacity) and one deep cut gas processing plant (the Musreau Deep
                                                                                                               Cut                                                                                                                facility).
                                                                                                               In total, the Cutbank Complex has 675 MMcf/d of shallow cut sweet gas processing capacity (618 MMcf/d net to
                                                                                                               Pembina), 205 MMcf/d of sweet deep cut extraction capacity and 200 MMcf/d of raw to deep cut sour gas processing capacity.
                                                                                                               The                                                                                                                Cutbank
                                                                                                               Complex also includes approximately 450 km of gathering pipelines and nine field compression stations.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Pembina's Saturn Complex (the "Saturn
Complex") – located near Hinton, Alberta, includes the Saturn I and Saturn II facilities for a total of 400 MMcf/d
of deep cut gas processing capacity as well as approximately 25 km of gathering pipelines.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Pembina's Resthaven Facility (the "Resthaven
Facility") – located near Grande Cache, Alberta, includes 300 MMcf/d (gross) of deep cut processing capacity, as
well as approximately 30 km of gathering pipelines.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Saskatchewan Ethane Extraction Plant ("SEEP")
– located to service the southeast Saskatchewan Bakken region; SEEP has deep cut processing capacity of 60 MMcf/d with
ethane fractionation capabilities of up to approximately 4.5 mbpd and 104 km of ethane delivery pipeline.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company's Cutbank Complex, Saturn Complex
and Resthaven Facility are connected to Pembina's Peace Pipeline system. SEEP is connected to Pembina's Vantage Pipeline
system.



Major Customers



Gas Services has approximately 50 customers,
including independent producers as well as some multi-national oil and gas companies. Gas Services processes customers' natural
gas at Pembina's Cutbank Complex, Saturn Complex and Resthaven Facilities and delivers the natural gas to the TransCanada pipeline
system in Alberta and the NGL to the Pembina-owned and operated Peace Pipeline system. Customers' natural gas processed at SEEP
is delivered to the TransGas System in Saskatchewan and the ethane is delivered to Pembina's Vantage Pipeline system.



Contractual Arrangements



Under the contractual arrangements with producers
associated with the Cutbank Complex, Saturn Complex, Resthaven Facility and SEEP, Pembina is largely protected from the impact
of market fluctuations in the price of natural gas and NGL. The gathering and processing business is based on charging fees to
customers on the volume of raw or processed gas that is gathered and/or processed through its facilities and the fees are largely
based on a fixed-fee-for-service methodology and, in some instances, based on fixed return on invested capital. The fee-for-service
contracts associated with the Gas Services business comprise a mixture of firm and interruptible service contracts of varying durations.
The contractual fee structure incorporates a capital fee based on functional unit usage, as well as provisions for the recovery
of operating and overhead costs.



- 27 -







In 2016, approximately 73 percent of the revenue
from these facilities was protected under contracts containing take-or-pay commitments. Any capacity that is not utilized on a
firm-service basis is provided to area producers on an interruptible basis.



Competitive Environment



Gas producers continued to focus their exploration
and development on liquid-rich gas areas during 2016. Pembina's Gas Services expansion plans continue to be focused in condensate
and NGL-rich geographical areas including the regional Montney and Duvernay areas, along with other emerging liquid-rich formations.



With its existing assets, Pembina is able to
process gas, extract condensate and NGL from the gas, and transport the liquids through its conventional pipelines to its CDH and
fractionation complexes, where Pembina is able to market the products to end users. With its integrated service offering along
the condensate and NGL value chain and substantial gas processing plant construction experience, Pembina believes it is strongly
positioned compared to other service providers to capture new business proximal to its existing operating areas. Evidence of this
is Pembina's continuing ability to secure new projects, such as Duvernay I and the related field hub, which are under construction,
and Musreau III and the Resthaven Expansion, which were completed in 2016.



Gas processing infrastructure requirements
are largely driven by area profitability, which is impacted by commodity prices, and the gas producer's ability to access capital.
In times where gas prices are relatively low and NGL prices are relatively high, producers are incentivized to extract as much
NGL out of the raw gas stream as possible. During times when NGL prices are lower, producers may opt to leave more liquids entrenched
within their raw gas. Pembina has the flexibility to offer facilities with varying degrees of liquids extraction capability to
support customers in a variety of market conditions.



Midstream Business



Overview



Pembina offers customers a comprehensive suite
of midstream products and services through its Midstream business as follows:



| | · | Crude oil Midstream assets include:
| | - | -----------------------------------



| | o | 14 truck terminals providing pipeline and market access for crude oil and condensate production
that are not pipeline connected;
| | - | --------------------------------------------------------------------------------------------------------------------------------



| | o | Pembina Nexus Terminal which includes an area where 21 inbound pipeline connections and 13 outbound
pipeline connections converge providing access to approximately 1.2 mmbpd of crude oil and condensate supply connected to the terminal;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o | Edmonton North Terminal which includes approximately 900 mbbls of above ground storage having access
to crude oil, synthetic crude oil and condensate supply transported on Pembina's operated pipelines and products from various third-party
operated pipelines; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o | Canadian Diluent Hub or "CDH",
which is under development and will include 500 mbbls of above ground storage and will provide direct connectivity for growing
domestic condensate volumes to the oil sands via downstream third-party pipelines.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 28 -







| | · | NGL Midstream includes two NGL operating
systems – Redwater West and Empress East.
| | - | ----------------------------------------------------------------------------------



| | o | The Redwater West NGL system ("Redwater West") includes the 750 MMcf/d (322.5
MMcf/d net to Pembina) Younger extraction and fractionation facility in British Columbia.; two 73 mbpd NGL fractionators (RFS I
and RFS II) and 8.3 mmbbls of finished product cavern storage in Redwater, Alberta; and third-party fractionation capacity in Fort
Saskatchewan, Alberta. Redwater West purchases NGL mix from various natural gas and NGL producers and fractionates it into finished
products for further distribution and sale. Also located at the Redwater site is Pembina's rail-based terminal which services Pembina's
proprietary and customer needs for importing and exporting NGL products.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o | The Empress East NGL system ("Empress East") includes 2.1 bcf/d capacity in the
straddle plants at Empress, Alberta; 20 mbpd of fractionation capacity and 1.1 mmbbls of cavern storage in Sarnia, Ontario; and
7.1 mmbbls of hydrocarbon storage at Corunna, Ontario. Empress East extracts NGL mix from natural gas at the Empress straddle plants
and purchases NGL mix from other producers/suppliers. Ethane and condensate are generally fractionated out of the NGL mix at Empress
and sold into Alberta markets. The remaining NGL mix is transported by pipeline to Sarnia, Ontario for further fractionation, distribution
and sale. Storage and terminalling services are also provided to customers at the Corunna site.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The financial performance of Pembina's Midstream
business can be affected by seasonal demands for products and other market factors. In NGL Midstream, propane inventory generally
builds over the second and third quarters of the year and is sold in the fourth quarter and the first quarter of the following
year during the winter heating season. Condensate, butane and ethane are generally sold rateably throughout the year. See "Risk
Factors – Risks Inherent in Pembina's Business – Midstream Business – Market Risk."



Crude Oil Midstream: Major Customers



Pembina's Crude Oil Midstream customers are
generally those who produce and/or market crude oil and condensate on Pembina's pipeline systems, are downstream markets for those
volumes, or are interested in ancillary services related to those volumes.



Pembina's crude oil terminals are configured
to access and provide services for the main, traded grades of Canadian crude oil as well as access domestic and imported condensate
streams. The terminals provide essential services for Pembina's customers with outbound delivery flexibility and above ground
storage.



At Pembina's truck terminals, the Company's
customer base generally comprises the same group who seek to transport various product volumes, including condensate, on Pembina's
conventional and oil sand systems. Truck terminals are particularly attractive to those producers who are unable to justify pipeline/oil
battery connections due to relatively low daily production, or are producing in advance of being pipeline connected. During 2016,
Pembina's truck terminal network brought an average of approximately 70 mbpd of crude oil and condensate onto the conventional
pipelines.



Crude Oil Midstream: Contractual Arrangements



The contractual arrangements underpinning Pembina's
Crude Oil Midstream business vary by service offering.



In aggregate, the Crude Oil Midstream business'
broad service offerings leverage the value chain – focusing on services that complement the existing network of facilities
and energy infrastructure across Pembina's asset base. Facilities and services provided by Crude Oil Midstream are complementary
to one another and create synergies for Pembina and its customers.



- 29 -







NGL Midstream: Major Customers



Pembina's NGL Midstream business extracts,
processes, stores, transports and markets NGL and offers these services to third-party customers across the WCSB and North America.
The assets are integrated across Canada and the U.S., and are also used to generate fee-for-service income. The business is supported
by an integrated supply, marketing and distribution function that contributes to the overall operating margin of Pembina.



Pembina purchases NGL mix from various natural
gas producers and fractionates it into finished products at Redwater West. Redwater West also includes natural gas supply volumes
from the Younger NGL extraction plant located at Taylor in northeastern British Columbia. The Younger plant supplies specification
NGL to local markets as well as NGL mix supply to the Fort Saskatchewan area for fractionation and sale and condensate to Pembina's
CDH.



Pembina extracts NGL from natural gas at the
Empress straddle plants and sells ethane and condensate in the western Canadian marketplace. Pembina transports propane/butane
NGL mix predominantly to Sarnia, Ontario for fractionation and sale into markets in central Canada and the eastern United States.



Ethane is predominately purchased by third-party
petro-chemical companies while another third party purchases the majority of the condensate from the Empress debutanizer. Third
parties operate the Younger NGL extraction plant, the E1 plant at Empress and storage and fractionation assets in Sarnia, Ontario
(which form part of the Empress East system). If for any reason these parties were unable to perform their obligations under the
various agreements with Pembina, the revenue and the operations of Pembina's NGL Midstream business could be negatively impacted.
See "Risk Factors – Risks Inherent in Pembina's Business – Reliance on Principal Customers and Operators."



NGL Midstream: Contractual Arrangements



Pembina's NGL Midstream business provides a
multitude of services for its customers. At Redwater West, Pembina provides NGL fractionation, storage, terminalling (loading and
off-loading services) and at Empress East, Pembina provides storage, loading, off-loading, ethane and condensate fractionation.
Storage services are typically provided to various customers under either a fee-for-service or fixed-return agreement with contract
lengths ranging between one to 25 years. Loading and off-loading services are provided on a fee-for-service basis under contracts
that range from one-year to multi-year terms. It is common practice for customers to sign up for more than one service with Pembina
including storage, loading and off-loading. NGL fractionation services at Redwater West are provided under a multi-year, fee-for-service
contract; ethane and condensate fractionation services at Empress East are provided to major energy companies under long-term,
cost-of-service arrangements. Pembina's Redwater West and Empress East assets are also employed to generate proprietary income
in addition to fee-for-service revenue streams.



Competitive Environment



Pembina's Midstream business model operates
in a competitive environment for transportation, terminalling, storage and rail. The demand for NGL terminalling, storage and rail
has grown due to supply growth and downstream consumption interest. This growth in demand for midstream services supported the
development of large-scale, fee-for-service infrastructure across Pembina's Midstream business. Going forward, the demand
for additional midstream infrastructure will be determined by the rate at which the WCSB hydrocarbon production grows.



Pembina's Midstream infrastructure and logistics
business is subject to competition from other truck terminals, storage facilities and fractionators which are either in the general
vicinity of the facilities or have gathering systems that are or could potentially extend into areas served by the facilities.



Producers in western Canada compete with producers
in other regions to supply crude oil, condensate, NGL and natural gas and other hydrocarbon products to customers in North America,
and the hydrocarbon industry also competes with other industries to supply the fuel, feedstock and other needs of consumers. Such
competition may have an adverse effect on the production of hydrocarbon products in western Canada and, as a result, on the demand
for Pembina's services.



- 30 -







The value potential associated with Pembina's
Midstream service offering is dependent upon the ability of Pembina to: provide connections to both downstream pipelines and end-use
markets; understand the value of the commodities transported, stored and terminalled; provide flexibility and a variety of storage
options; and adjust to a liquid, responsive, forward commodity market. Pembina actively monitors market conditions and stream values
and qualities to target revenue opportunities and service offerings. Pembina is also proactively working with upstream and downstream
customers to develop value-added terminalling solutions and increase available optionality. The Midstream business is exposed to
commodity price fluctuations, and the recent decline in commodity prices has impacted price differentials and spreads. Further,
the prices of products that are marketed by Pembina are subject to volatility as a result of such factors as seasonal demand changes,
extreme weather conditions, general economic conditions, changes in crude oil markets and other factors. See "Risk Factors
– Midstream Business – Market Risk."



OTHER INFORMATION RELATING TO PEMBINA'S
BUSINESS



Information and Communication Systems



Pembina employs modern SCADA technology on
all of its pipeline systems. The SCADA systems allow for continuous electronic monitoring and control of the pipeline systems from
dedicated computer consoles located in Pembina's Sherwood Park control centre. Operators monitor the computer consoles 24 hours
per day, 365 days per year. The SCADA systems and associated leak detection software continually monitor pipeline flow and operating
conditions. Line balance calculations are performed automatically by the system and alarms are triggered when imbalances are detected
or measured pressures do not match those projected by software models. When imbalance alarms are triggered, trained control centre
operators investigate the alarm or shut down the pipeline in accordance with Pembina's Segment Imbalance Response Protocol.



Pembina is committed to ongoing upgrade of
our system control and monitoring equipment. In 2015 and 2016 we migrated major pipeline systems to new SCADA platforms and we
presently have approximately $150 million allocated to long-term upgrades of our communications systems and field PLC network.



In February 2016, Pembina moved pipeline control
personnel to its newly constructed, state-of-the-art Sherwood Park Control Centre, further illustrating Pembina's commitment to
safe and reliable operations. Also in 2016, Pembina moved and upgraded its backup control center from Drayton Valley to a location
in the vicinity of Calgary.



Integrity Management



Pembina employs comprehensive integrity management
programs ("IMP's") and dedicates a significant portion of its annual operating budget directly to integrity management
activities. Pembina's IMP's include the systems, processes, analysis and documentation designed to ensure proactive and transparent
management of its pipeline systems and facilities, and compliance with applicable standards and regulations.



Pembina's IMP's are designed to achieve enhanced
safety, reliability and longevity through the entire asset lifecycle and are established in accordance with code requirements set
out by the Canadian Standards Association (CSA Z662) and to comply with various regulatory agencies across Canada and the U.S.



Proactive integrity management activities extend
into pipeline operations with programs including right-of-way patrols and public awareness to reduce the likelihood of third-party
damage, system-specific hazard evaluations and risk assessments, geotechnical programs to manage slope instability and river crossings,
the use of specific chemicals to reduce the likelihood of internal corrosion from impurities and bacteria in the oil, cathodic
protection to mitigate the possible growth of external corrosion, training and competency management programs for staff and contractors,
enhanced emergency response procedures and training exercises.



- 31 -







Between 2007 and 2012, Pembina completed a
baseline geotechnical inspection program of pipelines to inventory all water crossings and slopes and to assess integrity threats
posed by these crossings and slopes. Baselines continue each year as new pipelines are constructed or acquired. In 2014, Pembina
completed a detailed braided river study which identifies water crossings most susceptible to lateral movement. This study allowed
Pembina to proactively anticipate where this movement will occur and plan its annual mitigation, monitoring, and inspection procedures
accordingly. For 2015 and 2016, Pembina utilized the findings of this study to transition Pembina's geotechnical and hydrotechnical
programs to a more scientific and engineering-based approach, allowing for more accurate assessment of when mitigations need to
be completed. This enhanced assessment allows Pembina to better estimate when pipelines could be subjected to forces from ground
movement and river erosion, and better understand how much damage the pipelines would incur, if any. This transition aims to be
proactive and reduce the impact to Pembina's pipelines from unplanned environmental and geological events, and is designed to enhance
the predictability and accuracy of forecasting for Pembina's geotechnical and hydrotechnical maintenance and mitigation programs.



The cornerstone of Pembina's IMP's are the
use of in-line inspection ("ILI") technology to measure and record both the distribution and severity of specific
features in the pipe depending on the ILI technology. These inspections identify the location and severity of corrosion and other
metal loss defects, using high-resolution magnetic flux leakage tools, and of deformation defects, using high-resolution caliper
tools, with potential to adversely affect pipeline "fitness-for-service." Through proactive use of these sophisticated
electronic tools, defects (both internal and external) with the potential to compromise pipeline integrity are identified and repaired.
Projected defect growth rates and/or historical operating knowledge are used to plan re-inspection intervals. Pembina's re-inspection
frequency and intervals are typically selected so that remaining defects are re-assessed and repaired before they have a material
effect on pipe integrity.



Pembina has employed in-line inspection since
the early 1970s, progressing to newer, high resolution ILI technology in the late 1990s and continuing to implement improvements
to technology as they become available.



For those line segments with higher susceptibility
to crack failures, Pembina also employs specialized ultrasonic ILI crack detection technology. Pembina has completed crack detection
inspections on all of its major pipelines that are susceptible to cracking due to their operating conditions and vintage and continues
to monitor the susceptibility of cracking on an annual basis. Data from these inspections is analyzed by Pembina and third-party
technical experts, in conjunction with pipeline pressure data, to design appropriate mitigation, repair and re-assessment programs.



For pressure vessels and piping associated
with Pembina's gas processing and fractionation facilities, Pembina has developed and registered a Pressure Equipment Integrity
Management Program ("PEIMP") with the Alberta Boilers Safety Association ("ABSA"). The PEIMP
established methodology, processes and integrity verification are activities required to ensure Pembina is in full compliance with
the regulatory requirements set forth by ABSA. Pembina was last audited in 2014 and received top quartile scoring based upon all
audits conducted by ABSA. Since then, Pembina has introduced two new IMP's: the tank integrity management program ("TIMP")
and the facility integrity management program ("FIMP"). These programs were formally introduced in 2016 and address
the integrity requirements for storage assets and facility piping stations. In 2015 and 2016, Pembina conducted a series of internal
audits to ensure compliance with requirements of the PEIMP, TIMP, and FIMP. An interim periodic ABSA regulatory audit was completed
in April 2016 and Pembina again received top quartile results. In 2017, Pembina will be undergoing the PEIMP renewal audit by ABSA.
The objective of the program(s) detailed in the PEIMP, TIMP, and FIMP is to ensure the reliable, safe operation of pressure equipment
and facility equipment, and to prevent injury and environmental damage. These integrity management programs provide a formal approach
to the integrity management of Pembina's facility equipment throughout its life cycle – from design and construction, through
operation and maintenance to decommissioning. The programs apply to all registered and unregistered pressure equipment, storage
assets, and facility piping stations. Pembina continued activities in 2016 to comply with ABSA and other regulatory compliance
requirements, and plans to continue such activities in 2017, as set out below.



- 32 -







Summary of 2014, 2015, 2016 and planned 2017
PEIMP activities (in compliance with ABSA):



|Activity                     |  | 2014 |     |  | 2015 |  |     | 2016 |  |  | 2017 | 
|---------------------------- |  | ---- | --- |  | ---- |  | --- | ---- |  |  | ---- | 
|Pressure Vessel Inspections  |  |      | 580 |  |      |  | 147 |      |  |  | 372  | 
|Storage Tank Inspections     |  |      | 50  |  |      |  | 19  |      |  |  | 18   | 
|Piping System Inspections(1) |  |      | -   |  |      |  | 73  |      |  |  | 67   | 
|Internal Audits              |  |      | 2   |  |      |  | 4   |      |  |  | 3    | 



Notes:

| | (1) | Piping System Inspections' program commenced in 2015.
| | --- | -----------------------------------------------------



Environmental Matters



Pembina's pipelines and other assets are subject
to environmental controls in the form of approvals and compliance with applicable federal, provincial, and local laws and regulations
in Canada and the U.S. Such laws and regulations govern, among other things, operating and maintenance standards, emissions and
waste discharge and disposal. Management believes that Pembina's facilities and operations meet or exceed those requirements. Pembina
participates in the following applicable regulated emission reporting programs: Canadian Greenhouse Gas Emissions Reporting
Program, Alberta Specified Gas Reporting Program, and the Canadian National Pollutant Release Inventory Reporting Program.



To confirm regulatory compliance and conformance
with Pembina's internal environmental standards, Pembina has in place an Environmental Management System, which includes a planned
environmental audit program. As part of this program, regularly scheduled third-party environmental compliance audits are conducted
at various facilities within a selected business unit each year. The program is designed such that assets within each major business
unit are audited at least once every five years.



Pembina's focus on integrity management and
safe operations continues to result in low incident frequency and minimal environmental impact. Pembina makes expenditures each
year on pre-existing spill sites, none of which are material to Pembina, to manage environmental liability. In addition to the
environmental expenses associated with its operations, Pembina also invests in environmental assessment, planning, permitting and
post-construction monitoring associated with the Company's capital projects.



Safety Management Systems



Pembina's success is rooted in the safety and
security of its people and assets, wherever Pembina lives, works and plays. Pembina aims to minimize incidents with its corporate
safety culture of "Zero by Choice."



To achieve this, Pembina reinforces its commitment
to a safe worksite through contractor screening, frequent safety meetings, rigorous project inspection, investigation and review
of hazards, near misses and incidents. To further enhance improvement company-wide, Pembina has established a corporate Incident
Review Panel ("IRP") and a Safety Culture Improvement Steering Committee.



Pembina's IRP, which has been in place since
the first quarter of 2010, meets six times a year and consists of operations, engineering and safety leaders as well as business
and service unit Vice Presidents and the President and Chief Executive Officer. The IRP is focused on analyzing and understanding
the causes of incidents and determining and completing resulting action plans to eliminate re-occurrence and, more importantly,
ensuring that learnings are fully communicated and implemented on a corporate-wide basis.



Pembina holds a Certification of Recognition
designation which is awarded to employers who have health and safety programs that meet established government standards.



- 33 -







Compliance with all policies, procedures and
regulations is a requirement at Pembina. Pembina's Safety Management System ("SMS") employs a systematic approach
comprised of principles, standards, procedures, guidelines, and other supporting documents, aligned and supportive of the Health,
Safety and Environment Policy. Security and Emergency Management Programs are addressed as part of the SMS, which forms part of
Pembina's Operating Management System.



In addition, Pembina has plans in place to
enable it to safely respond to all emergency situations. Through the Company's emergency preparedness and training, Pembina minimizes
potential impacts and reduces service interruptions across all of its pipeline systems and related facilities. Comprehensive Emergency
Response Plans ("ERPs") set out specific procedures and responsibilities to ensure safe and rapid incident response
following the Incident Command System response structure. Pembina continually improves its ERPs with the latest landowner, resident
and stakeholder data and up-to-date maps of its pipeline systems and related facilities.



Inventories of specially-designed emergency
response equipment for deployment along Pembina's pipeline system are maintained and as a member of the Western Canadian Spill
Services Co-op, the Canadian Energy Pipeline Association Mutual Aid Plan and Emergency Response Assistance Canada, Pembina
has full access to emergency response equipment and participates in emergency response exercises with other industry members. Emergency
response equipment is strategically located near Pembina's operations to ensure a swift response.



Pipeline Rights-of-Way and Land Tenure



Pembina's real property interests fall into
two basic categories of ownership: (i) a number of locations, including many pumping stations and terminal and storage facilities,
which are owned in fee simple; and (ii) the majority of locations which are covered by leases, easements, rights-of-way, permits
or licences from landowners or governmental authorities permitting the use of such land for the construction and operation of a
pipeline. Pembina believes that the operator of each of its pipeline assets has sufficient property interests to permit the operation
of such assets.



Indemnification and Insurance



Pembina maintains insurance to provide coverage
in relation to the ownership of its assets and also maintains standard director and officer insurance consistent with industry
practice.



Pembina believes that it has procured such
insurance coverage as would be maintained by a prudent owner and operator of the type of assets owned and operated by Pembina.
This insurance coverage is subject to limits and exclusions or limitations on coverage that Pembina considers reasonable given
the cost of procuring insurance and current operating conditions. However, there can be no assurance that insurance coverage will
be adequate in any particular situation or that insurers will be able to fulfill their obligations should a claim be made. Further,
there can be no assurance that such insurance coverage will be available in the future on commercially reasonable terms or at commercially
reasonable rates.



Employees



As at December 31, 2016, Pembina employed 1,335
personnel, of which 734 were engaged in the performance of field operations and superintendence activities, and 601 were engaged
in the performance of facilities engineering, systems, management, finance, accounting, administration, human resources, information
services, drafting, business development and safety and environmental service activities. Of the above field operations employees,
18 are unionized. Pembina's workforce is relatively stable with limited turnover and employees are financially encouraged to remain
in Pembina's employment through options to purchase Common Shares, long-term incentive programs and pension plans, all of which
vest over time.



- 34 -







Corporate Governance and Corporate Social
Responsibility



Pembina is committed to maintaining a high
standard of corporate governance and ethical practices, both within the corporate boardroom and throughout its operations. Pembina's
corporate governance practices are designed with a view to:



| | · | Enhancing and preserving value;
| | - | -------------------------------



| | · | Protecting dividends;
| | - | ---------------------



| | · | Ensuring Pembina meets its obligations to all regulatory bodies, business partners, customers,
stakeholders, employees and Shareholders; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| | · | Operating in a safe, reliable and environmentally responsible way.
| | - | ------------------------------------------------------------------



Pembina is a public company listed on the TSX
and the NYSE, and it recognizes and respects rules and regulations in both Canada and the U.S.



Pembina's corporate governance practices comply
with the Canadian governance guidelines, which include the governance rules of the TSX and the Canadian Securities Administrators
(''CSA''):



| | · | National Instrument 52-110 - Audit Committees (Canadian audit committee rules);
| | - | -------------------------------------------------------------------------------



| | · | National Policy 58-201 - Corporate Governance Guidelines; and
| | - | -------------------------------------------------------------



| | · | National Instrument 58-101 - Disclosure of Corporate Governance Practices.
| | - | --------------------------------------------------------------------------



Pembina also complies with the governance listing
standards of the NYSE and the governance rules of the SEC that apply to foreign private issuers.



Pembina's governance practices comply with
the NYSE standards for U.S. companies in all significant respects, except as summarized on Pembina's website at www.pembina.com.
As a non-U.S. company, Pembina is not required to comply with most of the governance listing standards of the NYSE. As a foreign
private issuer, however, Pembina must disclose how its governance practices differ from those followed by U.S. companies that are
subject to the NYSE standards.



Pembina benchmarks its policies and procedures
against major North American companies to assess its standards, and it adopts best practices as appropriate. Some of its best practices
are derived from the NYSE rules and comply with applicable rules adopted by the SEC to meet the requirements of the Sarbanes-Oxley
Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act.



Further information about Pembina's corporate
governance will be contained in Pembina's information circular for its 2016 annual meeting, and copies of Pembina's Code of Ethics
and other corporate governance policies can be found on Pembina's website at www.pembina.com.



Certain of Pembina's policies are aimed at
preserving a positive relationship with the physical and social environment in which Pembina operates, as follows:



Health, Safety and Environment ("HSE")
Policy



Health, safety and the environment are top
priorities in all of Pembina's operations and business activities. Pembina is committed to being an industry leader in conducting
its business so that it meets or exceeds all applicable laws and regulations designed to protect the health and safety of workers,
the public and safeguard the environment affected by its activities. Pembina is also committed to improving its HSE performance.
These areas are of paramount importance to management, employees and contractors at the Company. Pembina believes that excellence
in HSE practices is essential to the well-being of the Company.



- 35 -







The HSE Committee of Pembina's Board of Directors
monitors compliance with the HSE Policy through regular reporting. Pembina's safety management system and Environment Management
System include Emergency and Security Management and are based on a systematic approach comprised of principles, standards, procedures,
guidelines, and other supporting documents that are aligned and supportive of the HSE Policy and other internal management systems
and programs. Pembina's systems conform to external industry consensus standards and applicable legislated requirements. The systems
have been designed to support the "Plan-Do-Check-Act" cycle of continuous improvement, and aim to ensure that Pembina's
"Safety Starts with Me – Zero by Choice" safety culture is embedded in our day-to-day operations. Management is
informed regularly of all important and/or significant HSE operational issues and initiatives through formal reporting and incident
management processes. The HSE management system is subject to ongoing internal and external review to ensure that it remains effective
as circumstances change.



Alcohol and Drug Policy



As part of Pembina's commitment to its employees,
contractors and the public, Pembina has in place a comprehensive alcohol and drug policy which ensures all employees remain fit
for work while on duty or on call. This policy forms a part of Pembina's approach to risk mitigation and safety and supports the
HSE Policy.



Aboriginal Relations Policy



By striving for positive and mutually-beneficial
relationships with Aboriginal leadership and communities, Pembina employees, consultants and contractors will help build continued
success for Pembina's existing and expanding systems and other businesses. Pembina desires to enter into lasting and mutually-beneficial
relationships with all Aboriginal peoples affected by its operations.



Whistleblower Policy



Pembina is committed to high standards of professional
and ethical conduct in all activities. Pembina's reputation for honesty and integrity among its stakeholders is key to the success
of its business. The transparency, honesty, integrity and accountability of Pembina's financial, administrative and management
practices are vital. These high standards guide the decisions of the Board of Directors and are relied upon by Pembina's stakeholders
and the financial markets.



For these reasons, it is critical to maintain
a workplace where concerns regarding questionable business practices can be raised without fear of any discrimination, retaliation
or harassment. Pembina also believes that encouraging a culture of openness and ethical leadership from management will help this
process. As such, Pembina's Whistleblower Policy encourages directors, officers, employees, consultants, contractors, agents and
external stakeholders to act responsibly and raise any serious concerns and report any potential instances of unethical practices
within Pembina, rather than overlooking a problem or seeking a resolution of the problem outside Pembina. In addition to raising
concerns directly with Pembina management, individuals may report concerns to the chair of the Audit Committee, or may raise concerns
on a confidential or anonymous basis through Pembina's whistleblower line which is available 24 hours a day, seven days a week
both online and through a toll-free number. Complaints received by Pembina under its Whistleblower Policy are thoroughly investigated.



Security Management Policy



Pembina is committed to protecting the safety
of its workers, the public, and to safeguarding Pembina's facilities, information and information technologies. These areas are
of paramount importance to management, employees and contractors at the Company. Pembina believes that excellence in security management
is essential to the well-being of the Company. As such, Pembina is committed to identifying security risks and establishing appropriate
programs and procedures to reduce these risks to an acceptable level, and to testing these programs and procedures to assess their
effectiveness on a regular basis.



- 36 -







CANADIAN OIL AND GAS INDUSTRY



General



The
discussion below provides a high-level overview of the crude and heavy oil industry, the NGL industry and midstream infrastructure
industry, with a particular focus on western Canada given that a signification portion of Pembina's operations are situated in
Alberta. Pembina also has operations in eastern Canada and the U.S. within its Midstream business. Volumes which feed into those
assets originate in western Canada before being transported to eastern markets via a third-party pipeline, as discussed below under
"Product Transportation: Export Liquids Pipeline Systems." Further, Pembina has an operating footprint in the
North Dakota and Saskatchewan Bakken resource play. The Vantage Pipeline imports ethane from these areas into western Canada, as
discussed below under "Product Transportation: Feeder Pipeline Systems."



Western Canada is the major source of conventional
crude oil, synthetic crude oil, natural gas, bitumen and related products (including NGL and condensate) in Canada. Domestic crude
oil and natural gas production in the west comes primarily from Alberta with lesser amounts from British Columbia, Saskatchewan,
Manitoba and the Northwest Territories. Synthetic crude oil and bitumen come from the oil sands developments near Fort McMurray,
Alberta. Efficient, low cost, and safe transportation by pipeline, rail and truck from producing fields to refineries, processing
plants and domestic and export markets is essential to the Canadian oil and gas industry.



Canadian Crude and Heavy Oil Overview



While western Canada has one of the world's
largest crude oil reserves, the WCSB was once considered to be a declining resource. However, over the past number of years, the
crude oil industry in Alberta and western Canada in general has been revived due to the implementation of improved drilling technologies
which have enabled increased recoveries and have enhanced economics. These technologies (for example, multi-stage hydraulic fracturing)
have allowed producers to access tighter areas of conventional reserves as well as shales, which were previously considered to
be uneconomical. Through this development, crude oil produced from the WCSB has significantly increased.



Alberta is also abundant in oil sands –
a natural mixture of sand, water, clay and a type of natural heavy oil called "bitumen." Once the bitumen is recovered
and processed to separate it from the sand and water and upgraded, synthetic crude oil is produced. Oil sands may be extracted
by surface mining where it is moved by trucks to a cleaning facility or by in–situ processes which use steam, solvents or
thermal energy to allow the bitumen to be pumped to the surface. Because bitumen is so viscous, it requires dilution with lighter
hydrocarbons, such as condensate, to make it transportable by pipeline.



Condensate is the "heaviest" gas
liquid. As producers increase their production of oil sands and heavy oil, there is a growing demand for condensate, as it is used
to dilute bitumen. With assets spanning across the crude oil, condensate and NGL value chains, Pembina is uniquely positioned to
provide customers with access to condensate via pipeline or rail as well as produced through fractionation.



Pipelines continue to be the most economical
and predominant mode of transporting large amounts of crude oil, NGL, condensate, and heavy oil; however, given the extensive rail
infrastructure network across North America and the lack of sufficient export pipeline capacity, transporting hydrocarbon products
by rail has gained momentum.



- 37 -







Product Transportation: Feeder Pipeline
Systems



Feeder pipeline systems gather petroleum products
from producing fields and facilities for transport to regional centres for storage, fractionation, refining and connection to larger
pipelines. From these centres, petroleum products are further transported by export pipeline or rail systems either to domestic
markets in western or eastern Canada or to markets in the northern United States for end–use, or used as feedstock in refineries
or the petrochemical industry. The major operational centre for the Canadian oil and natural gas industry is the Edmonton/Fort
Saskatchewan area of Alberta, which is the largest crude oil refining centre in western Canada and a major fractionation and market
hub for NGL and related products. In addition, the Edmonton/Fort Saskatchewan area is the hub of the Alberta feeder pipeline network
and the starting point of many large Canadian export pipelines.



All of Pembina's pipelines are feeder pipelines
or gathering systems. Average revenue volumes in Pembina's Conventional Pipelines business were 650 mbpd in 2016. The Conventional
Pipelines transport the majority of its products to the Edmonton/Fort Saskatchewan, Alberta area, while a smaller amount is delivered
to the Alberta Ethane Gathering System via the Vantage Pipeline from the North Dakota Bakken play. Pembina's oil sands and heavy
oil pipelines had a combined contracted capacity of 975 mbpd in 2016. These pipelines primarily transport products from established
production fields in their respective service areas (the Syncrude Project and the Horizon Project) into the refining and export
pipeline centres at Edmonton. The Cheecham Lateral transports synthetic crude oil from a common pump station on the Syncrude Pipeline
and Horizon Pipeline to a terminalling facility located near Cheecham, Alberta, where it is then used as diluent for oil sands
projects in the area. The Nipisi Pipeline and Mitsue Pipeline provide diluted heavy oil and diluent transportation for operators
in the Pelican Lake and Peace River heavy oil regions of Alberta.



Conventional feeder pipelines and gathering
systems generally experience lower volumes during the spring months as a result of reduced drilling primarily due to weight restrictions
on roads, producers conducting maintenance on their batteries and gas plant turnarounds. The magnitude and duration of road weight
restrictions are dependent upon spring weather conditions. Many battery operators also perform maintenance work on production facilities
during the spring months. Road restrictions and battery maintenance can also impact gathering pipeline receipts during the fall
months, although the impact on throughput is generally less pronounced than during the spring months.



Product Transportation: Export Liquids
Pipeline Systems



The export liquids pipelines originating in
the Edmonton area are the TransMountain Pipeline and the Enbridge Pipeline. Crude oil and refined products delivered to domestic
and export markets on the west coast are transported through the TransMountain Pipeline. Crude oil and refined products delivered
to eastern Canada and the northern United States are transported through the Enbridge Pipeline. NGL delivered to eastern Canadian
and export markets are transported through the Enbridge Pipeline. The existing Keystone Pipeline and Express Pipeline also export
crude oil from Hardisty, Alberta. However, none of Pembina's systems are directly connected to Hardisty.



NGL Overview



The NGL industry involves the production, storage,
transportation and marketing of products that are extracted from natural gas prior to its sale to end-use customers. The profitability
of the industry is based on the products extracted being of greater economic value as separate commodities (net of the costs of
extraction and transportation) than as components of natural gas.



Natural gas is a mixture of various hydrocarbon
components, the most abundant of which is methane. The higher value hydrocarbons, which include ethane (C2), propane
(C3), butane (C4) and condensate (C5+), are generally in gaseous form at the pressures and temperatures
under which natural gas is gathered and transported. NGL extraction facilities recover certain higher value hydrocarbons, such
as ethane, propane, butane and condensate, from natural gas for sale in a liquid form. The significant majority of NGL supply in
western Canada is derived from natural gas processing, with the remainder derived from the refining of crude oil.



- 38 -







The NGL value chain begins with the gathering
of gas produced from the wellhead and moving it to a gas plant. The gas then gets processed through field processing plants and
mainline extraction facilities, as well as treated for removal of water, sulphur and other impurities. The value chain culminates
with the transportation of NGL mix from the gas plant via pipeline to the fractionation plants where the NGL will be separated
into saleable products and marketed to the final NGL customers.



Condensate is produced naturally at the well-head
when natural gas is brought to the surface at a gas well. Most condensate is typically separated from natural gas at the field
gas plant. It is then either trucked to a connection point on a pipeline, or the natural gas plant may be connected directly into
a gathering pipeline system for onward delivery to market.



NGL Extraction



NGL is recovered at three distinct types of
facilities: natural gas field plants, natural gas mainline straddle plants and oil refineries. Field plants process raw natural
gas, which is produced from wells in the immediate vicinity, to remove impurities such as water, sulphur and carbon dioxide prior
to the delivery of natural gas to the major natural gas pipeline systems. Field plants also remove almost all condensate and as
much as 65 percent of propane and 80 percent of butane in order to meet pipeline specifications, leaving ethane and unrecovered
NGL in the sales gas. Most western Canadian field plants do not extract ethane but leave it in the natural gas. Once processed,
the sales gas is then compressed and delivered to one of the major gas transmission systems in the region. In the Province of Alberta,
any residual NGL and ethane in the natural gas is extracted at mainline straddle plants prior to export. Pembina has ownership
interests in three of the five mainline Empress straddle plants on the Nova Gas Transmission system and the Younger Extraction
plant on the Spectra system.



NGL extraction produces a mixed hydrocarbon
product (either ethane-plus or propane-plus), which must be further processed in subsequent steps to separate out the individual
products. At most field facilities, only sufficient NGL to make the residual gas marketable is extracted; however, with the addition
of deep cut processing facilities such as Pembina's Musreau Deep Cut facility (an example of a field straddle plant) and Pembina's
Empress plant (an example of a mainline straddle plant) further NGL extraction is possible to ensure the maximum amount of NGL
is recovered. NGL products have historically been priced relative to oil, so this additional level of recovery is dependent on
the relative value between oil and natural gas. As the relative price of oil versus natural gas increases, the economic impetus
for this activity is also increased.



NGL Fractionation



NGL mix extracted at field plants and straddle
plants is transported via pipelines, truck or rail to fractionation facilities, which enhance value by separating the mix into
its components: ethane, propane, butane and condensate. Due to size, storage and transportation limitations, fractionation generally
does not occur at field plants, but rather at larger, well-connected, centralized locations. NGL mix is moved by truck or pipeline
to fractionation facilities. Once fractionated, the products are stored and transported to end markets by pipeline, truck or rail.



NGL Transportation



The efficient movement of NGL products requires
significant infrastructure, including transportation assets (pipelines, trucks, rail cars), storage facilities, and terminals (rail
and truck). The safest, most efficient and the lowest-cost means for moving NGL products to markets is by pipeline. The Canadian
energy sector has an extensive pipeline network for the transportation of natural gas to field plants and extraction facilities,
and NGL to fractionation facilities, petrochemical complexes, underground storage facilities and the consuming customer. Pipelines
serve as the main mode of NGL transportation (pre and post fractionation). Additionally, truck and rail also transport NGL, where
rail specifically transports component pieces of NGL.



- 39 -







NGLStorage



Storage assets offer a number of key strategic
advantages, which include: (i) providing the necessary operational buffer between production of NGL (which varies daily depending
on gas flows and composition) and their consumption (which can vary from day-to-day and season-to-season depending on market needs);
(ii) allowing NGL sellers to store inventory to accommodate outages in NGL fractionation plants; and (iii) exploiting seasonal
price differentials that may develop over the course of a year (particularly for propane and butane).



NGL Marketing



The North American markets for NGL are largely
continental in nature, though exports have been increasing, with end uses varying substantially by product from heating and transportation
fuels to petrochemical and crude oil refining feed stocks. Ethane is used as feedstock for the petrochemical industry. Propane
is the most versatile of the NGL products with uses such as home and commercial heating, crop drying, cooking, motor fuel and petrochemical
feedstock. Butane is used primarily in gasoline blending, either directly or in the production of iso-octane and as a diluent for
heavy oil. Condensate is used primarily as a diluent to blend with heavy crude oil to decrease viscosity and density, allowing
transport in pipelines. In addition, condensate is used as a refinery feedstock in the production of gasoline.



Midstream Services for Crude Oil, Synthetic
Crude Oil & NGL



Crude oil, synthetic crude oil and NGL produced
in Canada are transported to market through extensive gathering and transportation systems – feeder pipeline systems and
export pipeline systems – discussed above.



Growth in crude oil midstream is largely focused
on receipt terminals, above ground storage and other hub services including delivery of product to local refineries and other downstream
pipelines for eventual export. Crude oil production ends up being consumed in refineries. Refineries are widely distributed geographically
and can be located anywhere along the transportation chain, from the production basin hub locations to mid-point junctions on transmission
networks to tidewater where foreign production is able to access North American markets via marine transport. For locations directly
connected to Pembina's pipelines, there is a service requirement to manage supply with demand, balancing between the pipeline and
the customer.



On the receipt side, Pembina's truck terminals
are a means for oil, condensate and NGL production, which is not pipeline connected, to secure transportation access to market.



Where pipelines converge, there is a requirement
to manage the product flow between the systems. Historically this has been buffered through tankage downstream of Pembina's operations.
There is an internal demand for hub storage which will not only buffer flows for downstream deliveries, but also smooth operation
of Pembina's complex batched conventional pipeline network and its oil sands pipelines. As a further service category, with the
growth in demand for diluents for heavy oil transportation, there is a new requirement to manage diluents prior to injection into
the various diluent delivery pipelines. This demand includes accessing the greatest variety of diluents, meeting diluent quality
specifications and storage. To this end, Pembina continues to develop the Canadian Diluent Hub (described in "Description
of Pembina's Business and Operations – Midstream Business"), which is expected to provide interconnectivity
via pipeline and potentially rail to downstream markets and enable Pembina to offer upstream and downstream customers access to
merchant storage and other complementary midstream services, and become a diluent platform for servicing the oil sands.



- 40 -







DESCRIPTION OF THE CAPITAL STRUCTURE OF
PEMBINA



The authorized capital of Pembina consists
of an unlimited number of Common Shares, a number of Class A Preferred Shares, issuable in series, not to exceed twenty percent
of the number of issued and outstanding Common Shares at the time of issuance of any Class A Preferred Shares, and an unlimited
number of Class B Preferred Shares which are deemed to be automatically redeemed if a holder ceases to be a wholly-owned subsidiary
of the Company. As of December 31, 2016, there were approximately 397 million Common Shares outstanding, approximately 14 million
Common Shares issuable pursuant to outstanding options under the Option Plan, and approximately 5 million Common Shares reserved
for issuance pursuant to the Series F Convertible Debentures. In addition, 10 million Series 1 Class A Preferred Shares, 6 million
Series 3 Class A Preferred Shares, 10 million Series 5 Class A Preferred Shares, 10 million Series 7 Class A Preferred Shares,
9 million Series 9 Class A Preferred Shares, 7 million Series 11 Class A Preferred Shares and 10 million Series 13 Class A Preferred
Shares were outstanding as of December 31, 2016.



The following is a summary of the rights, privileges,
restrictions and conditions attaching to the Common Shares, the Class A Preferred Shares and the Class B Preferred Shares.



Common Shares



Holders of Common Shares are entitled to receive
notice of and to attend all meetings of Shareholders and to one vote at such meetings for each Common Share held. The holders of
the Common Shares are, at the discretion of the Board of Directors and subject to applicable legal restrictions, entitled to receive
any dividends declared by the Board of Directors on the Common Shares, and are entitled to share in the remaining property of Pembina
upon liquidation, dissolution or winding-up, subject to the rights of the Class A Preferred Shares and Class B Preferred Shares.



Pembina has a shareholder rights plan (the
"Plan") that was adopted to ensure, to the extent possible, that all Shareholders are treated fairly in connection
with any take-over bid for Pembina and to ensure that the Board is provided with sufficient time to evaluate unsolicited take-over
bids and to explore and develop alternatives to maximize Shareholder value. The Plan creates a right that attaches to each present
and subsequently issued Common Share. Until the Separation Time (as defined in the Plan), which typically occurs at the time of
an unsolicited take-over bid, whereby a person acquires or attempts to acquire 20 percent or more of the Common Shares, the rights
are not separable from the Common Shares, are not exercisable and no separate rights certificates are issued. Each right entitles
the holder, other than the 20 percent acquirer, from and after the separation time and before certain expiration times, to acquire
one Common Share at a substantial discount to the market price at the time of exercise. The Board of Directors may waive the application
of the Plan in certain circumstances. The Plan was reconfirmed by Shareholders at Pembina's 2016 annual meeting and must be reconfirmed
at every third annual meeting thereafter. A copy of the agreement relating to the current Plan has been filed on Pembina's SEDAR
and EDGAR profiles on May 13, 2016 and May 31, 2016, respectively.



Class A Preferred Shares



The Class A Preferred Shares were not intended
to and will not be used by the Company for anti-takeover purposes without Shareholder approval. Subject to certain limitations,
the Board may, from time to time, issue Class A Preferred Shares in one or more series and determine for any such series, its designation,
number of shares and respective rights, privileges, restrictions and conditions. The Class A Preferred Shares as a class have,
among others, the provisions described below.



Each series of Class A Preferred Shares shall
rank on parity with every other series of Class A Preferred Shares, and shall have priority over the Common Shares, the Class B
Preferred Shares and any other class of shares ranking junior to the Class A Preferred Shares with respect to redemption, the payment
of dividends, the return of capital and the distribution of assets in the event of the liquidation, dissolution or winding-up of
Pembina. The Class A Preferred Shares of any series may also be given such preferences, not inconsistent with the provisions thereof,
over the Common Shares, the Class B Preferred Shares and over any other class of shares ranking junior to the Class A Preferred
Shares, as may be determined by the Board.



- 41 -







In the event of the liquidation, dissolution
or winding-up of Pembina, if any cumulative dividends or amounts payable on a return of capital in respect of a series of Class
A Preferred Shares are not paid in full, the Class A Preferred Shares of all series shall participate rateably in: (a) the amounts
that would be payable on such shares if all such dividends were declared at or prior to such time and paid in full; and (b) the
amounts that would be payable in respect of the return of capital as if all such amounts were paid in full; provided that if there
are insufficient assets to satisfy all such claims, the claims of the holders of the Class A Preferred Shares with respect to repayment
of capital shall first be paid and satisfied and any assets remaining shall be applied towards the payment and satisfaction of
claims in respect of dividends. After payment to the holders of any series of Class A Preferred Shares of the amount so payable,
the holders of such series of Class A Preferred Shares shall not be entitled to share in any further distribution of the property
or assets of Pembina in the event of the liquidation, dissolution or winding-up of Pembina.



Holders of any series of Class A Preferred
Shares will not be entitled (except as otherwise provided by law and except for meetings of the holders of Class A Preferred Shares
or a series thereof) to receive notice of, attend at, or vote at any meeting of shareholders of Pembina, unless the Board shall
determine otherwise in the terms of a particular series of Class A Preferred Shares, in which case voting rights shall only be
provided in circumstances where Pembina shall have failed to pay a certain number of dividends on such series of Class A Preferred
Shares, which determination and number of dividends and any other terms in respect of such voting rights, shall be determined by
the Board and set out in the designations, rights, privileges, restrictions and conditions of such series of Class A Preferred
Shares. Other than as set out below, the material characteristics of each series of Class A Preferred Shares are substantially
the same.



The table below outlines the number of outstanding,
and the material provisions of, each of the issued series of Class A Preferred Shares.



|Series |  | Issue Date         |  | Issued and 
Outstanding |            |  | Amount (C$) |   |             | Annual 
Dividend 
Rate(1) |  |   | Redemption and 
Conversion Option 
Date(2)(3) |  | Reset 
Spread(3) |                  |  | Per Share 
Base 
Redemption/
 Liquidation 
Value |      |                                                | Right to 
Convert on 
a one for 
one basis(4)
|------ |  | ------------------ |  | ----------------------- | ---------- |  | ----------- | - | ----------- | ------------------------- |  | - | --------------------------------------------- |  | ---------------- | ---------------- |  | ------------------------------------------------ | ---- | ---------------------------------------------- | ---------------------------------------------
|1      |  | July 26, 2013      |  |                         | 10,000,000 |  |             | $ | 250,000,000 |                           |  | $ | 1.0625                                        |  |                  | December 1, 2018 |  |                                                  | 2.47 | %                                              |                                              
|3      |  | October 2, 2013    |  |                         | 6,000,000  |  |             | $ | 150,000,000 |                           |  | $ | 1.1750                                        |  |                  | March 1, 2019    |  |                                                  | 2.60 | %                                              |                                              
|5      |  | January 16, 2014   |  |                         | 10,000,000 |  |             | $ | 250,000,000 |                           |  | $ | 1.2500                                        |  |                  | June 1, 2019     |  |                                                  | 3.00 | %                                              |                                              
|7      |  | September 11, 2014 |  |                         | 10,000,000 |  |             | $ | 250,000,000 |                           |  | $ | 1.1250                                        |  |                  | December 1, 2019 |  |                                                  | 2.94 | %                                              |                                              
|9      |  | April 10, 2015     |  |                         | 9,000,000  |  |             | $ | 225,000,000 |                           |  | $ | 1.1875                                        |  |                  | December 1, 2020 |  |                                                  | 3.91 | %                                              |                                              
|11     |  | January 15, 2016   |  |                         | 6,800,000  |  |             | $ | 170,000,000 |                           |  | $ | 1.4375                                        |  |                  | March 1, 2021    |  |                                                  | 5.00 | %(5)                                           |                                              
|13     |  | April 27, 2016     |  |                         | 10,000,000 |  |             | $ | 250,000,000 |                           |  | $ | 1.4375                                        |  |                  | June 1, 2021     |  |                                                  | 4.96 | %
                                         (5) |                                              



Notes:

| | (1) | The holder is entitled to receive a fixed, cumulative preferential dividend per year payable quarterly
on the 1st day of March, June, September and December, as declared by the Board of Directors.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The Company may, at its option, redeem all or a portion of an outstanding series of Class A Preferred
Shares on the Redemption Option Date and every fifth year thereafter for the Base Redemption Value per share plus all accrued and
unpaid dividends.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | The dividend rate will reset on the Redemption and Conversion Option Date and every five years
thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus the applicable Reset Spread noted
above.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | A holder has the right, subject to certain conditions, to convert their Class A Preferred Shares
into cumulative redeemable Class A Preferred Shares of a specified series on the Conversion Option date and every fifth anniversary
thereafter. The even numbered series of Class A Preferred Shares carry the right to receive floating, cumulative preferential dividends
at a rate, reset quarterly, equal to the sum of the then 90 day Government of Canada treasury bill rate plus the applicable reset
spread.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 42 -







| | (5) | The dividend rate will reset on the Redemption and Conversion Option Date and every five years
thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus the applicable Reset Spread noted
above, provided that in any event, the rate for the Series 11 and Series 13 Class A Preferred Shares shall not be less than 5.75
percent.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Class B Preferred Shares



The Class B Preferred Shares were not intended
to and will not be used by the Company for anti-takeover purposes without Shareholder approval. If at any time a holder of Class
B Preferred Shares ceases to be, or is not, a direct or indirect wholly owned subsidiary of Pembina, Pembina, with or without knowledge
of such event, shall be deemed, without further action or notice, to have automatically redeemed all of the Class B Preferred Shares
held by such holder in exchange for the redemption amount as set out in Pembina's articles per share together with all declared
but unpaid dividends thereon (the "Redemption Amount").



All of the issued Class B Preferred Shares
of Pembina were cancelled pursuant to the amalgamation between Pembina and its wholly-owned subsidiary Alberta Oil Sands Pipeline
Ltd. on October 1, 2015. There are currently no Class B Preferred Shares outstanding.



Holders of Class B Preferred Shares are not
entitled to receive notice of, to attend or to vote at any meeting of the Shareholders, except as required by law. The Class B
Preferred Shares are retractable and redeemable at the option of the holder thereof and Pembina, respectively.



The holders of Class B Preferred Shares shall
be entitled to receive, if and when declared by the Board of Directors, preferential non-cumulative dividends and upon the liquidation,
dissolution or winding-up of Pembina, the holders of Class B Preferred Shares shall be entitled to receive for each such share,
in priority to the holders of Common Shares, the Redemption Amount.



Premium DividendTM and Dividend Reinvestment
Plan



Effective January 6, 2016, Pembina amended
and restated its DRIP and all associated agreements. Pursuant to the amended and restated DRIP, eligible Pembina shareholders have
the opportunity to receive, by reinvesting the cash dividends declared payable by Pembina on their common shares, either (i) additional
common shares at a discount of up to five percent to the Average Market Price (as defined in the DRIP), pursuant to the "Dividend
Reinvestment Component" of the DRIP, or (ii) a premium cash payment (the "Premium DividendTM") equal
to 101 percent of the amount of reinvested dividends, pursuant to the "Premium DividendTM Component" of the DRIP.
Until otherwise announced by the Company, the Board of Directors has set the current discount rate at three percent to the Average
Market Price. Additional information about the terms and conditions of the DRIP, including eligibility restrictions and withholding
taxes can be found at www.pembina.com. Pembina will determine, for each dividend payment date during a period for which the DRIP
is not suspended, the amount of new equity or premium cash payments, if any that will be made available under the DRIP on that
date.



Series F Convertible Debentures



The Series F Convertible Debentures are listed
on the TSX under the symbol "PPL.DB.F."



The Series F Convertible Debentures were issued
April 29, 2011 in the principal aggregate amount of $172,500,000. The Series F Convertible Debentures bear interest at an annual
rate of 5.75 percent payable semi-annually on June 30 and December 31 and have a maturity date of December 31, 2018. Each Series
F Convertible Debenture is convertible into Common Shares at the option of the holder at any time prior to the close of business
on December 31, 2017 and the business day immediately preceding the date specified for redemption by Pembina of the Series F Convertible
Debentures, at a conversion price of $29.53 per Common Share, subject to adjustment in certain events. Since December 31, 2016,
the Series F Convertible Debentures may be redeemed in whole or in part at the option of Pembina at a price equal to their principal
amount plus accrued and unpaid interest. Any accrued unpaid interest will be paid in cash.



- 43 -







As at December 31, 2016, $148 million principal
amount of Series F Convertible Debentures were outstanding.



Pembina retains a cash conversion option on
the Series F Convertible Debentures, allowing the Company to pay cash to the converting holder of the debentures in lieu of the
holder's entitlement to Common Shares, at the option of the Company.



Credit Facilities



Pembina's credit facilities as at December
31, 2016 consisted of an unsecured $2.5 billion revolving credit facility due May 31, 2020, which includes a $250 million accordion
feature (the "Revolving Credit Facility") and an unsecured operating facility of $30 million due May 31, 2017
(the "Operating Credit Facility", and together with the Revolving Credit Facility, the "Credit Facilities").
Borrowings on the Credit Facilities bear interest at prime lending rates plus nil to 1.25 percent or Bankers' Acceptances rates
plus 1.00 percent to 2.25 percent. Margins on the Credit Facilities are based on the credit rating of Pembina's senior unsecured
debt. There are no repayments due over the term of the Credit Facilities. As at December 31, 2016, Pembina had $353 million drawn
on bank debt and $35 million in cash, leaving $2.2 billion of cash and unutilized debt facilities. Pembina also had an additional
$30 million in letters of credit issued in a separate demand letter of credit facility.



Medium Term Notes



Pembina's obligations under its Medium Term
Notes and the Medium Term Note Indenture are guaranteed by certain subsidiaries of Pembina. Subject to certain conditions, as noted
below, Pembina may redeem each series of Medium Term Notes, either in whole, or in part, upon not less than 30 and not more than
60 days prior notice, at a price equal to the greater of (i) par and (ii) the Canada Yield Price (as defined below), plus, in either
case, accrued but unpaid interest, if any, to but excluding the date of redemption. "Canada Yield Price" means,
in effect, a price equal to the price of a specific series of Medium Term Notes calculated in accordance with generally accepted
financial practice in Canada to provide a yield to maturity equal to the Government of Canada Yield (as defined below) plus the
Redemption Premium set forth in the table below. "Government of Canada Yield" means, on any date, in effect, the
yield to maturity on such date compounded semi-annually which a non-callable Government of Canada bond would carry if issued, in
Canadian dollars in Canada, at 100 percent of its principal amount on such date with a term to maturity equal to the remaining
term to maturity of the specified series of Medium Term Notes. The Government of Canada Yield will be the average of the yields
determined by two major Canadian investment dealers selected by Pembina. In certain circumstances following a Change of Control
(as such term is defined in the Medium Term Note Indenture) and a resulting downgrade in the ratings of the Medium Term Notes to
below an investment grade, Pembina will be required to make an offer to repurchase all or, at the option of any holder of Medium
Term Notes, any part, at a purchase price payable in cash equal to 101 percent of the aggregate outstanding principal amount thereof
plus accrued and unpaid interest, if any, to the date of purchase. After certain dates (as set forth below), Medium Term Notes,
Series 3, 4, 5, 6, 7, 8 and 9 may be redeemed at a price equal to par, plus accrued but unpaid interest, if any, to but excluding
the date of redemption.



The table below outlines the number of outstanding,
and the material provisions of, each of our issued series of Medium Term Notes.





|Series |  | Issue
    Date   |     | Maturity
    Date |  | Principal
    and 
    Outstanding Amount 
    (C$) |             |  | Annual
     Coupon Rate |  |      | Redemption
     Premium  (per annum) | 
|------ |  | ---------------- | --- | ----------------- |  | --------------------------------------------------- | ----------- |  | ----------------------- |  | ---- | ------------------------------------ | 
|1(1)   |  | March 29, 2011   |     | March 29, 2021    |  | $                                                   | 250,000,000 |  |                         |  | 4.89 | %                                    | 
|2(1)   |  | October 22, 2012 |     | October 24, 2022  |  | $                                                   | 450,000,000 |  |                         |  | 3.77 | %                                    | 
|3(2)   |  | April 30, 2013   |     | April 30, 2043    |  | $                                                   | 200,000,000 |  |                         |  | 4.75 | %                                    | 
|       |  | February 2, 2015 | (3) |                   |  | $                                                   | 150,000,000 |  |                         |  |      |                                      | 
|       |  | June 16, 2015    | (3) |                   |  | $                                                   | 100,000,000 |  |                         |  |      |                                      | 
|4(4)   |  | April 4, 2014    |     | March 25, 2044    |  | $                                                   | 600,000,000 |  |                         |  | 4.81 | %                                    | 
|5(5)   |  | February 2, 2015 |     | February 3, 2025  |  | $                                                   | 450,000,000 |  |                         |  | 3.54 | %                                    | 
|6(6)   |  | June 16, 2015    |     | June 15, 2027     |  | $                                                   | 500,000,000 |  |                         |  | 4.24 | %                                    | 
|7(7)   |  | August 11, 2016  |     | August 11, 2026   |  | $                                                   | 500,000,000 |  |                         |  | 3.71 | %                                    | 
|8(8)   |  | January 20, 2017 |     | January 22, 2024  |  | $                                                   | 300,000,000 |  |                         |  | 2.99 | %                                    | 
|9(9)   |  | January 20, 2017 |     | January 21, 2047  |  | $                                                   | 300,000,000 |  |                         |  | 4.74 | %                                    | 



- 44 -







Notes:

| | (1) | Pembina may redeem the Medium Term Notes, Series 1 and Medium Term Notes, Series 2, at a price
equal to the greater of (i) par and (ii) the Canada Yield Price (as defined above), plus, in either case, accrued but unpaid interest,
if any, to but excluding the date of redemption.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Pembina may redeem the Medium Term Notes, Series 3, (a) at any time prior to October 30, 2042 at
a price equal to the greater of (i) par and (ii) the Canada Yield Price, and (b) at any time on or after October 30, 2042 at a
price equal to par, plus, in either case, accrued but unpaid interest, if any, to but excluding the date of redemption.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | On February 2, 2015 and June 16, 2015, Pembina re-opened its Medium Term Notes, Series 3 for $150
million and $100 million principal amounts, respectively.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Pembina may redeem the Medium Term Notes, Series 4, (a) at any time prior to September 25, 2043
at a price equal to the greater of (i) par and (ii) the Canada Yield Price, and (b) at any time on or after September 25, 2043
at a price equal to par, plus, in either case, accrued but unpaid interest, if any, to but excluding the date of redemption.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | Pembina may redeem the Medium Term Notes, Series 5, (a) at any time prior to November 3, 2024 at
a price equal to the greater of (i) par and (ii) the Canada Yield Price, and (b) at any time on or after November 3, 2024 at a
price equal to par, plus, in either case, accrued but unpaid interest, if any, to but excluding the date of redemption.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (6) | Pembina may redeem the Medium Term Notes, Series 6, (a) at any time prior to March 15, 2027 at
a price equal to the greater of (i) par and (ii) the Canada Yield Price and (b) at any time on or after March 15, 2027 at a price
equal to par, plus, in either case, accrued but unpaid interest, if any, to but excluding the date of redemption.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (7) | Pembina may redeem the Medium Term Notes, Series 7, (a) at any time prior to May 11, 2026 at a
price equal to the greater of (i) par and (ii) the Canada Yield Price and (b) at any time on or after May 11, 2026 at a price equal
to par, plus, in either case, accrued but unpaid interest, if any, to but excluding the date of redemption.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (8) | Pembina may redeem the Medium Term Notes, Series 8, (a) at any time prior to November 22, 2023
at a price equal to the greater of (i) par and (ii) the Canada Yield Price and (b) at any time on or after November 22, 2023 at
a price equal to par, plus, in either case, accrued but unpaid interest, if any, to but excluding the date of redemption.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (9) | Pembina may redeem the Medium Term Notes, Series 9, (a) at any time prior to July 21, 2046 at a
price equal to the greater of (i) par and (ii) the Canada Yield Price and (b) at any time on or after July 21, 2046 at a price
equal to par, plus, in either case, accrued but unpaid interest, if any, to but excluding the date of redemption.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Other Debt



Other debt at December 31, 2016 included $267
million aggregate principal amount of unsecured senior notes of Pembina issued November 18, 2009 and due November 18, 2019 and
which bear interest at a fixed rate of 5.91 percent per annum (the "Series D Senior Notes"), and $200 million
aggregate principal amount of unsecured senior notes of Pembina issued September 30, 2006 and due September 30, 2021 and which
bear interest at a fixed rate of 5.58 percent per annum (the "Series C Senior Notes"). The Senior Notes are subject
to the maintenance of certain financial ratios as described in the MD&A.



Credit Ratings



The following information with respect to Pembina's
credit ratings is provided as it relates to Pembina's financing costs and liquidity. Specifically, credit ratings affect Pembina's
ability to obtain short-term and long-term financing and impact the cost of such financing. A reduction in the current ratings
on Pembina's debt by its rating agencies, particularly a downgrade below investment grade ratings, could adversely affect Pembina's
cost of financing and its access to sources of liquidity and capital. In addition, changes in credit ratings may affect Pembina's
ability to enter into, and the associated costs of entering into, normal course derivative or hedging transactions. Credit ratings
are intended to provide investors with an independent measure of credit quality of any issues of securities. The credit ratings
assigned by the rating agencies are not recommendations to purchase, hold or sell the securities nor do the ratings comment on
market price or suitability for a particular investor. Any rating may not remain in effect for a given period of time or may be
revised or withdrawn entirely by a rating agency in the future if in its judgement circumstances so warrant.



- 45 -







Pembina has paid each of S&P and DBRS (as
defined below) their customary fees in connection with the provision of the below ratings. Pembina has not made any payments to
S&P or DBRS over the past two years for services unrelated to the provision of such ratings.



DBRS Limited



DBRS Limited ("DBRS") has
assigned a debt rating of 'BBB' to each issued series of Medium Term Notes. DBRS has also rated Pembina's senior unsecured notes
'BBB'.



The BBB rating is the fourth highest of DBRS'
ten rating categories for long-term debt, which range from AAA to D. DBRS uses "high" and "low" designations
on ratings from AA to C to indicate the relative standing of securities being rated within a particular rating category. The absence
of a "high" or "low" designation indicates that a rating is in the middle of the category. The BBB rating indicates
that, in DBRS's view, the rated securities are of adequate credit quality. The capacity for the payment of financial obligations
is considered acceptable; however the issuer may be vulnerable to future events.



Each issued series of Class A Preferred Shares
has been rated 'Pfd-3' by DBRS. The Pfd-3 rating is the third highest of six rating categories for preferred shares, which range
from a high of Pfd-1 to a low of D. "High" or "low" grades are used to indicate the relative standing within
a rating category. The absence of either a "high" or "low" designation indicates the rating is in the middle
of the category. According to the DBRS rating system, preferred shares rated Pfd-3 are of adequate credit quality. While protection
of dividends and principal is still considered acceptable, the issuing entity is more susceptible to adverse changes in financial
and economic conditions, and there may be other adverse conditions present which detract from debt protection.



When a significant event occurs that directly
impacts the credit quality of a particular entity or group of entities, DBRS will attempt to provide an immediate rating opinion.
However, if there is uncertainty regarding the outcome of the event, and DBRS is unable to provide an objective, forward-looking
opinion in a timely fashion, then the ratings of the issuer will be placed "Under Review."



Standard & Poor's



Standard & Poor's Rating Services, a division
of The McGraw-Hill Companies ("S&P") has a long-term corporate credit rating on Pembina of 'BBB'. S&P
also has assigned a rating of 'BBB' to each issued series of Medium Term Notes.



The BBB rating is the fourth highest rating,
of S&P's ten rating categories for long-term debt which range from 'AAA' to 'D'. The ratings from 'AA' to 'CCC' may be modified
by the addition of a plus (+) or minus (–) sign to show relative standing within the major rating categories. Issues of debt
securities rated BBB are judged by S&P to exhibit adequate protection parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.



Each issued series of Class A Preferred Shares
has been rated 'P-3 (High)' by S&P. S&P's ratings for preferred shares range from a high of 'P-1' to a low of 'P-5'. "High"
or "low" grades are used to indicate the relative standing within a rating category. According to the S&P rating
system, securities rated P-3 are regarded as having significant speculative characteristics. While such securities will likely
have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse
conditions. An obligation rated P-3 (High) is less vulnerable to non-payment than other speculative issues. However, it faces major
ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to the obliger's inadequate
capacity to meet its financial commitment on the obligation.



- 46 -







These securities ratings are not recommendations
to purchase, hold or sell the securities inasmuch as such ratings do not comment as to market price or suitability for a particular
investor. There is no assurance that any rating will remain in effect for any given period of time or that any rating will not
be revised or withdrawn entirely by a rating agency in the future if, in its judgment, circumstances so warrant.



See "Risk Factors – General Risk
Factors – Credit Ratings."



DIVIDENDS AND DISTRIBUTIONS



Cash Dividends



The declaration and payment of any dividend
by Pembina is at the discretion of the Board of Directors and will depend on numerous factors, including compliance with applicable
laws and the financial performance, debt obligations, working capital requirements and future capital requirements of Pembina and
its subsidiaries. See "Risk Factors." The agreements governing Pembina's Credit Facilities provide that if an
event of default has occurred under the Credit Facilities, the indebtedness may be accelerated by the lenders, and the ability
to pay dividends thereupon ceases. Pembina is restricted from making distributions (including the declaration of dividends) if
it is in default under its Credit Facilities (or a default would be expected to occur as a result of such distribution) or if its
borrowings exceed its borrowing base threshold.



Common Shares



Pembina pays cash dividends on its Common Shares
on a monthly basis to shareholders of record on the 25th calendar day of each month (except for the December record
date, which is December 31st), if, as and when determined by the Board of Directors. Should the record date fall on a weekend or
a statutory holiday, the effective record date will be the previous business day. The dividend payment date is the 15th of the
month following the record date. Should the payment date fall on a weekend or on a holiday the business day prior to the weekend
or holiday becomes the payment date. The following table sets forth the amount of monthly cash dividends paid by Pembina on its
Common Shares in 2014, 2015, 2016 and to date in 2017.



Cash Dividends Per Common Share



|Month of Payment Date |  | 2014 |       |     | 2015 |   |        | 2016 |  |   | 2017   |    
|--------------------- |  | ---- | ----- | --- | ---- | - | ------ | ---- |  | - | ------ | ---
|January               |  | $    | 0.140 |     |      | $ | 0.1450 |      |  | $ | 0.1525 |    
|February              |  | $    | 0.140 |     |      | $ | 0.1450 |      |  | $ | 0.1525 |    
|March                 |  | $    | 0.140 |     |      | $ | 0.1450 |      |  | $ | 0.1525 |    
|April                 |  | $    | 0.140 |     |      | $ | 0.1450 |      |  | $ | 0.1525 |    
|May                   |  | $    | 0.140 |     |      | $ | 0.1450 |      |  | $ | 0.16   | (3)
|June                  |  | $    | 0.145 | (1) |      | $ | 0.1525 | (2)  |  | $ | 0.16   |    
|July                  |  | $    | 0.145 |     |      | $ | 0.1525 |      |  | $ | 0.16   |    
|August                |  | $    | 0.145 |     |      | $ | 0.1525 |      |  | $ | 0.16   |    
|September             |  | $    | 0.145 |     |      | $ | 0.1525 |      |  | $ | 0.16   |    
|October               |  | $    | 0.145 |     |      | $ | 0.1525 |      |  | $ | 0.16   |    
|November              |  | $    | 0.145 |     |      | $ | 0.1525 |      |  | $ | 0.16   |    
|December              |  | $    | 0.145 |     |      | $ | 0.1525 |      |  | $ | 0.16   |    
|Total                 |  | $    | 1.715 |     |      | $ | 1.7925 |      |  | $ | 1.89   |    



Notes:

| | (1) | On May 8, 2014, Pembina announced an increase to its monthly dividend from $0.14 to $0.145.
| | --- | -------------------------------------------------------------------------------------------

| | (2) | On May 5, 2015, Pembina announced an increase to its monthly dividend from $0.145 to $0.1525.
| | --- | ---------------------------------------------------------------------------------------------

| | (3) | On May 5, 2016, Pembina announced an increase to its monthly dividend from $0.1525 to $0.16.
| | --- | --------------------------------------------------------------------------------------------

| | (4) | On February 7, 2017, Pembina announced that the Board of Directors had declared a dividend of $0.16
per Common Share to be paid, subject to applicable law, on March 15, 2017 to holders of Common Shares of record on February 25,
2017.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 47 -







Preferred Shares



Dividends on each issued series of Class A
Preferred Shares are payable on the first day of March, June, September and December of each year, if, as and when declared by
the Board. Additional information regarding dividends payable on the Class A Preferred Shares can be found under the heading "Description
of the Capital Structure of Pembina – Class A Preferred Shares" herein.



The following table sets forth the amount of
monthly cash dividends paid by Pembina on its Class A Preferred Shares in 2014, 2015, 2016 and to date in 2017.



Cash Dividends Per Class A Preferred Share



|Quarterly 
Payment 
Date |  | Series 1 |          |  | Series 3 |   |         | Series 5(1) |  |   | Series 7(2) |  |  | Series 9(3) |         |  | Series 11(4) |   |          | Series 13(5) |  |   | Total    | 
|------------------------ |  | -------- | -------- |  | -------- | - | ------- | ----------- |  | - | ----------- |  |  | ----------- | ------- |  | ------------ | - | -------- | ------------ |  | - | -------- | 
|                         |  |          |          |  |          |   |         |             |  |   |             |  |  |             |         |  |              |   |          |              |  |   |          | 
|2014                     |  |          |          |  |          |   |         |             |  |   |             |  |  |             |         |  |              |   |          |              |  |   |          | 
|Mar 1                    |  | $        | 0.265625 |  |          | $ | 0.29375 |             |  | $ | 0.1507      |  |  |             | N/A     |  |              |   | N/A      |              |  |   | N/A      | 
|June 1                   |  | $        | 0.265625 |  |          | $ | 0.29375 |             |  | $ | 0.3125      |  |  |             | N/A     |  |              |   | N/A      |              |  |   | N/A      | 
|Sept 1                   |  | $        | 0.265625 |  |          | $ | 0.29375 |             |  | $ | 0.3125      |  |  |             | N/A     |  |              |   | N/A      |              |  |   | N/A      | 
|Dec 1                    |  | $        | 0.265625 |  |          | $ | 0.29375 |             |  | $ | 0.3125      |  |  | $           | 0.2497  |  |              |   | N/A      |              |  |   | N/A      | 
|2015                     |  |          |          |  |          |   |         |             |  |   |             |  |  |             |         |  |              |   |          |              |  |   |          | 
|Mar 1                    |  | $        | 0.265625 |  |          | $ | 0.29375 |             |  | $ | 0.3125      |  |  | $           | 0.28125 |  |              |   | N/A      |              |  |   | N/A      | 
|June 1                   |  | $        | 0.265625 |  |          | $ | 0.29375 |             |  | $ | 0.3125      |  |  | $           | 0.28125 |  |              |   | N/A      |              |  |   | N/A      | 
|Sept 1                   |  | $        | 0.265625 |  |          | $ | 0.29375 |             |  | $ | 0.3125      |  |  | $           | 0.28125 |  |              | $ | 0.4685   |              |  |   | N/A      | 
|Dec 1                    |  | $        | 0.265625 |  |          | $ | 0.29375 |             |  | $ | 0.3125      |  |  | $           | 0.28125 |  |              | $ | 0.296875 |              |  |   | N/A      | 
|2016                     |  |          |          |  |          |   |         |             |  |   |             |  |  |             |         |  |              |   |          |              |  |   |          | 
|Mar 1                    |  | $        | 0.265625 |  |          | $ | 0.29375 |             |  | $ | 0.3125      |  |  | $           | 0.28125 |  |              | $ | 0.296875 |              |  | $ | 0.1812   | 
|June 1                   |  | $        | 0.265625 |  |          | $ | 0.29375 |             |  | $ | 0.3125      |  |  | $           | 0.28125 |  |              | $ | 0.296875 |              |  | $ | 0.359375 | 
|Sept 1                   |  | $        | 0.265625 |  |          | $ | 0.29375 |             |  | $ | 0.3125      |  |  | $           | 0.28125 |  |              | $ | 0.296875 |              |  | $ | 0.359375 | 
|Dec 1                    |  | $        | 0.265625 |  |          | $ | 0.29375 |             |  | $ | 0.3125      |  |  | $           | 0.28125 |  |              | $ | 0.296875 |              |  | $ | 0.359375 | 
|2017                     |  |          |          |  |          |   |         |             |  |   |             |  |  |             |         |  |              |   |          |              |  |   |          | 
|Mar 1(6)                 |  | $        | 0.265625 |  |          | $ | 0.29375 |             |  | $ | 0.3125      |  |  | $           | 0.28125 |  |              | $ | 0.296875 |              |  | $ | 0.359375 | 



Notes:

| | (1) | The initial dividend on the Series 5 Class A Preferred Shares was paid on March 1, 2014 for the
period commencing on the date of issuance (April 4, 2014) up to but excluding March 1, 2014.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The initial dividend on the Series 7 Class A Preferred Shares was paid on December 1, 2014 for
the period commencing on the date of issuance (September 11, 2014) up to but excluding December 1, 2014.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | The initial dividend on the Series 9 Class A Preferred Shares was paid on September 1, 2015 for
the period commencing on the date of issuance (April 10, 2015) up to but excluding September 1, 2015.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | The initial dividend on the Series 11 Class A Preferred Shares was paid on March 1, 2016 for the
period commencing on the date of issuance (January 15, 2016) up to but excluding March 1, 2016.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | The initial dividend on the Series 13 Class A Preferred Shares was paid on September 1, 2016 for
the period commencing on the date of issuance (April 27, 2016) up to but excluding September 1, 2016.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (6) | On January 5, 2017, Pembina announced that the Board of Directors had declared a quarterly dividend
of $0.265625 per Series 1 Class A Preferred Share, $0.29375 per Series 3 Class A Preferred Share, $0.3125 per Series 5 Class A
Preferred Share, $0.28125 per Series 7 Class A Preferred Share, $0.296875 per Series 9 Class A Preferred Share, $0.359375 per Series
11 Class A Preferred Share and $0.359375 per Series 13 Class A Preferred Share to be paid, subject to applicable law, on March
1, 2017 to holders of record on February 1, 2017.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 48 -







MARKET FOR SECURITIES



Trading Price and Volume



The Common Shares are listed and traded on
the TSX under the symbol "PPL." The Common Shares are also listed on the NYSE under the trading symbol "PBA."
The following table sets forth the price ranges for and trading volumes of the Common Shares on the TSX for 2016, as reported by
the TSX, and on the NYSE for 2016, as reported by NYSE.



|          |  | TSX (PPL) |       |  | NYSE (PBA) | 
|--------- |  | --------- | ----- |  | ---------- | 
|Month     |  | High ($)  |       |  | Low ($)    | 
|January   |  |           | 32.32 |  |            | 
|February  |  |           | 34.07 |  |            | 
|March     |  |           | 35.86 |  |            | 
|April     |  |           | 38.37 |  |            | 
|May       |  |           | 38.71 |  |            | 
|June      |  |           | 41.00 |  |            | 
|July      |  |           | 40.25 |  |            | 
|August    |  |           | 39.98 |  |            | 
|September |  |           | 40.56 |  |            | 
|October   |  |           | 41.98 |  |            | 
|November  |  |           | 41.34 |  |            | 
|December  |  |           | 42.73 |  |            | 



The Series F Convertible Debentures are listed
and traded on the TSX under the symbol "PPL.DB.F." The following table sets forth the price range for and trading volume
of the Series F Convertible Debentures on the TSX for 2016, as reported by the TSX.



|Month     |  | High ($) |        |  | Low ($) |  |        | Close ($) |  |  | Volume | 
|--------- |  | -------- | ------ |  | ------- |  | ------ | --------- |  |  | ------ | 
|January   |  |          | 112.70 |  |         |  | 104.58 |           |  |  | 112.70 | 
|February  |  |          | 119.00 |  |         |  | 110.00 |           |  |  | 118.46 | 
|March     |  |          | 122.99 |  |         |  | 117.44 |           |  |  | 120.89 | 
|April     |  |          | 130.00 |  |         |  | 120.44 |           |  |  | 129.88 | 
|May       |  |          | 131.00 |  |         |  | 124.14 |           |  |  | 131.00 | 
|June      |  |          | 139.00 |  |         |  | 129.72 |           |  |  | 133.00 | 
|July      |  |          | 135.59 |  |         |  | 127.15 |           |  |  | 129.40 | 
|August    |  |          | 135.28 |  |         |  | 127.59 |           |  |  | 132.85 | 
|September |  |          | 137.00 |  |         |  | 129.61 |           |  |  | 136.53 | 
|October   |  |          | 142.00 |  |         |  | 136.00 |           |  |  | 140.31 | 
|November  |  |          | 135.50 |  |         |  | 127.24 |           |  |  | 135.50 | 
|December  |  |          | 145.00 |  |         |  | 134.13 |           |  |  | 142.40 | 



- 49 -







The Series 1 Class A Preferred Shares, Series
3 Class A Preferred Shares, Series 5 Class A Preferred Shares, Series 7 Class A Preferred Shares, Series 9 Class A Preferred Shares,
Series 11 Class A Preferred Shares, and Series 13 Class A Preferred Shares are listed and traded on the TSX under the symbols "PPL.PR.A",
"PPL.PR.C", "PPL.PR.E", "PPL.PR.G", "PPL.PR.I", "PPL.PR.K" and "PPL.PR.M",
respectively. The following tables set forth the price range for and trading volume of the Series 1, Series 3, Series 5, Series
7 and Series 9 Class A Preferred Shares on the TSX for 2016, the price range and trading volume of the Series 11 Class A Preferred
Shares on the TSX for the period from listing on January 15, 2016 through to December 31, 2016, and the price range and trading
volume of the Series 13 Class A Preferred Shares for the period from listing on April 27, 2016 through to December 31, 2016, all
as reported by the TSX.



|          |  | Series 1 (PPL.PR.A) |       |  | Series 3 (PPL.PR.C) |  |       | Series 5 (PPL.PR.E) | 
|--------- |  | ------------------- | ----- |  | ------------------- |  | ----- | ------------------- | 
|Month     |  | High ($)            |       |  | Low ($)             |  |       | Close ($)           | 
|January   |  |                     | 16.97 |  |                     |  | 12.80 |                     | 
|February  |  |                     | 13.70 |  |                     |  | 12.63 |                     | 
|March     |  |                     | 15.98 |  |                     |  | 12.65 |                     | 
|April     |  |                     | 17.27 |  |                     |  | 15.19 |                     | 
|May       |  |                     | 16.00 |  |                     |  | 15.15 |                     | 
|June      |  |                     | 15.81 |  |                     |  | 14.00 |                     | 
|July      |  |                     | 15.98 |  |                     |  | 14.42 |                     | 
|August    |  |                     | 17.15 |  |                     |  | 15.85 |                     | 
|September |  |                     | 17.00 |  |                     |  | 16.33 |                     | 
|October   |  |                     | 17.93 |  |                     |  | 16.13 |                     | 
|November  |  |                     | 18.50 |  |                     |  | 17.51 |                     | 
|December  |  |                     | 19.00 |  |                     |  | 17.37 |                     | 



|          |  | Series 7 (PPL.PR.G) |       |  | Series 9 (PPL.PR.I) |  |       | Series 11 (PPL.PR.K) | 
|--------- |  | ------------------- | ----- |  | ------------------- |  | ----- | -------------------- | 
|Month     |  | High ($)            |       |  | Low ($)             |  |       | Close ($)            | 
|January   |  |                     | 18.98 |  |                     |  | 14.45 |                      | 
|February  |  |                     | 15.47 |  |                     |  | 14.10 |                      | 
|March     |  |                     | 18.03 |  |                     |  | 14.12 |                      | 
|April     |  |                     | 19.05 |  |                     |  | 16.92 |                      | 
|May       |  |                     | 18.30 |  |                     |  | 17.24 |                      | 
|June      |  |                     | 18.28 |  |                     |  | 15.33 |                      | 
|July      |  |                     | 18.29 |  |                     |  | 16.60 |                      | 
|August    |  |                     | 19.57 |  |                     |  | 18.19 |                      | 
|September |  |                     | 19.06 |  |                     |  | 18.65 |                      | 
|October   |  |                     | 19.96 |  |                     |  | 18.27 |                      | 
|November  |  |                     | 20.17 |  |                     |  | 19.19 |                      | 
|December  |  |                     | 20.76 |  |                     |  | 19.22 |                      | 



1 January 15-31



|            |  | Series 13 (PPL.PR.M) |      
|----------- |  | -------------------- | -----
|Month       |  | High ($)             |      
|April 27-30 |  |                      | 25.10
|May         |  |                      | 25.24
|June        |  |                      | 25.87
|July        |  |                      | 26.65
|August      |  |                      | 26.43
|September   |  |                      | 26.28
|October     |  |                      | 26.39
|November    |  |                      | 26.33
|December    |  |                      | 26.45



- 50 -









Prior Sales



In 2016, options to purchase Common Shares
were issued to employees pursuant to Pembina's Option Plan. For a discussion of options issued and the terms thereof, refer to
Note 23 to Pembina's Financial Statements, the portions of which are found under the headings "Disclosure of share option
plan" and "Share options granted" are incorporated by reference herein.



DIRECTORS AND OFFICERS



Directors of Pembina



The following table sets out the name and residence
for each director of Pembina as of the date of this Annual Information Form, the date on which they were appointed as a director
of Pembina and their principal occupations during the past five years.



|Name and Residence                                        |  | Date Appointed  |  | Principal Occupation
        During the Past Five Years                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--------------------------------------------------------- |  | --------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                          |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Anne-Marie N. Ainsworth(2)(4)
        Houston, Texas, USA |  | October 7, 2014 |  | Independent businesswoman since March 2014; prior thereto, President and Chief Executive Officer and a member of the Board of Directors of the general partner of Oiltanking Partners, L.P. (a master limited partnership engaged in independent storage and transportation of crude oil, refined petroleum products and liquefied petroleum gas) and President and Chief Executive Officer of Oiltanking Holding Americas, Inc. from November 2012 to March 2014; prior thereto, Senior Vice President of Refining of Sunoco Inc. from November 2009 to March 2012. Currently member of the board of directors of Archrock, Inc. and Kirby Corporation.
|                                                          |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Grant D. Billing(2)(3)
        Calgary, Alberta, Canada   |  | April 2, 2012   |  | Independent businessman since November 2011; prior thereto, Chairman and Chief Executive Officer of Superior Plus Corp. (a propane distribution, specialty chemicals and construction products distribution company) from July 2006 to November 2011 and Executive Chairman since 1998.  Currently member of the board of directors of Badger Daylighting Ltd., Cortex Business Solutions Inc. and Tervita Corporation.                                                                                                                                                                                                                                 
|                                                          |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Michael H. Dilger
        Calgary, Alberta, Canada        |  | January 1, 2014 |  | President and Chief Executive Officer of Pembina since January 1, 2014; prior thereto, President and Chief Operating Officer of Pembina from February 2012 until December 31, 2012; prior thereto, Vice President, Chief Operating Officer of Pembina from November 2008 to February 2012.  Currently member of the board of directors of Trilogy Energy Corp.                                                                                                                                                                                                                                                                                          



- 51 -







|Name and Residence                                              |  | Date Appointed    |  | Principal Occupation
        During the Past Five Years                                                                                                                                                                                                                                                                                                                                                                                                                         
|--------------------------------------------------------------- |  | ----------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Randall J. Findlay(1)(5)(6)(7)
        Calgary, Alberta, Canada |  | March 8, 2007     |  | Corporate director; prior thereto, President of Provident Energy Trust from 2001 to 2006.
    Currently member of the board of directors of HNZ Group Inc. and Superior Plus Corp.                                                                                                                                                                                                                                                                                              
|                                                                |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Lorne B. Gordon(3)(4)
        Calgary, Alberta, Canada          |  | October 24, 1997  |  | Independent businessman; prior thereto, Vice Chairman of Coril Holdings Ltd. (a private investment and holding company) from 2004 to 2006.                                                                                                                                                                                                                                                                                                                                      
|                                                                |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|David M.B. LeGresley(2)(5)
        Toronto, Ontario, Canada     |  | August 16, 2010   |  | Independent businessman since September 2008; prior thereto, Vice Chairman of National Bank Financial from 2006 to 2008. Currently member of the board of directors of Equitable Group Inc.                                                                                                                                                                                                                                                                                     
|                                                                |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Robert B. Michaleski(4)
        Calgary, Alberta, Canada        |  | January 4, 2000   |  | Corporate director; prior thereto, Chief Executive Officer of Pembina from February, 2012 until December 31, 2013; prior thereto, President and Chief Executive Officer of Pembina. Currently member of the board of directors of Essential Energy Services Ltd. and Vermilion Energy Inc.                                                                                                                                                                                      
|                                                                |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Leslie A. O'Donoghue(3)(5)
        Calgary, Alberta, Canada     |  | December 17, 2008 |  | Executive Vice President, Corporate Development and Strategy and Chief Risk Officer of Agrium Inc. (a retail supplier of agricultural products and services and a producer and marketer of agricultural nutrients and industrial products) since October 30, 2012; prior thereto, Executive Vice President, Operations of Agrium Inc. from April 30, 2011 to October 30, 2012; prior thereto, Chief Legal Officer and Senior Vice President, Business Development of Agrium Inc.
|                                                                |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Jeffrey T. Smith(4)(5)(8)
        Calgary, Alberta, Canada      |  | April 2, 2012     |  | Independent businessman. Currently serves on the board of NAL Resources Limited (an oil and gas company).                                                                                                                                                                                                                                                                                                                                                                       
|                                                                |  |                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Gordon J. Kerr(2)(3)(9)
        Calgary, Alberta, Canada        |  | January 15, 2015  |  | Independent businessman since 2013; prior thereto, President and Chief Executive Officer and director of Enerplus Corporation (a North American energy producer) from May 2001 until July 2013.                                                                                                                                                                                                                                                                                 



Notes:

| | (1) | Chairman of the Board.
| | --- | ----------------------

| | (2) | Member of Audit Committee.
| | --- | --------------------------

| | (3) | Member of Human Resources and Compensation Committee.
| | --- | -----------------------------------------------------

| | (4) | Member of the Health, Safety and Environment Committee.
| | --- | -------------------------------------------------------

| | (5) | Member of the Governance Committee.
| | --- | -----------------------------------

| | (6) | Mr. Findlay was a director of Wellpoint Systems Inc. (a TSX Venture Exchange listed company) from
June 2008 until January 31, 2011. Wellpoint Systems Inc. was placed into receivership by two of its lenders on January 31, 2011.
Wellpoint Systems Inc. was a company supplying software to the energy industry in Canada, the U.S. and internationally.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 52 -







| | (7) | Mr. Findlay was a director of Spyglass Resources Corp. (a TSX listed company) from March 2013 until
May 13, 2015. Spyglass Resources Corp. was placed into receivership by a syndicate of its lenders on November 26, 2015. Spyglass
Resources Corp. was an intermediate oil and gas exploration and production company.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (8) | Mr. Smith was a director of Spyglass Resources Corp. (a TSX listed company) from March 2013 until
August 11, 2015. Spyglass Resources Corp. was placed into receivership by a syndicate of its lenders on November 26, 2015. Spyglass
Resources Corp. was an intermediate oil and gas exploration and production company.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (9) | Mr. Kerr was a director of Laricina Energy Ltd., a private company, until February 5, 2016. Laricina
Energy Ltd. was subject to proceedings under the Companies Creditors Arrangement Act in 2015. On February 1, 2016, the proceedings
were conditionally discharged.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Shareholders elect the directors of Pembina
at each annual meeting of the Shareholders. The directors of Pembina serve until the next annual meeting of the Shareholders or
until their successors are duly elected or appointed. All of Pembina's directors are "independent" within the meaning
of National Instrument 58–101 – Disclosure of Corporate Governance Practices, adopted by the CSA, with the exception
of Mr. Dilger, who is President and Chief Executive Officer of Pembina. In addition, Pembina has adopted Standards for Director
Independence which meet or exceed the requirements set out in National Policy 58–201 – Corporate Governance Guidelines,
National Instrument 52–110 – Audit Committees, the SEC rules and regulations, the Sarbanes-Oxley Act of 2002
and the NYSE rules.



The Board of Directors has four committees,
the Audit Committee, the Health, Safety and Environment Committee, and the Human Resources and Compensation Committee, the Governance
Committee. Additional information regarding the responsibilities of these committees will be contained in Pembina's information
circular for its annual meeting of Shareholders to be held on May 5, 2017.



Executive Officers of Pembina



The following table sets out the name, residence
and office held with Pembina for each executive officer of the Company, as well as their principal occupations during the past
five years.



|Name and Residence                                 |  | Office with Pembina                                      |  | Principal Occupation
        During the Past Five Years                                                                                                                                                                                                                                                                                       
|-------------------------------------------------- |  | -------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                   |  |                                                          |  |                                                                                                                                                                                                                                                                                                                                               
|Michael H. Dilger
        Calgary, Alberta, Canada |  | President and Chief Executive Officer                    |  | President and Chief Executive Officer since January 1, 2014; prior thereto, President and Chief Operating Officer of Pembina since February 15, 2012; prior thereto, Vice President, Chief Operating Officer of Pembina since November 2008.                                                                                                  
|                                                   |  |                                                          |  |                                                                                                                                                                                                                                                                                                                                               
|Paul J. Murphy
        Calgary, Alberta, Canada    |  | Senior Vice President, Pipeline and Crude Oil Facilities |  | Senior Vice President, Pipeline and Crude Oil Facilities since September 4, 2013; prior thereto, Vice President, Conventional Pipelines of Pembina since February 14, 2011; prior thereto, Vice President, NGL Extraction of Inter Pipeline Fund since July 2004.                                                                             
|                                                   |  |                                                          |  |                                                                                                                                                                                                                                                                                                                                               
|Stuart V. Taylor
        Calgary, Alberta, Canada  |  | Senior Vice President, NGL and Natural Gas Facilities    |  | Senior Vice President, NGL and Natural Gas Facilities since September 4, 2013; prior thereto, Vice President, Gas Services of Pembina since July 1, 2009.                                                                                                                                                                                     
|                                                   |  |                                                          |  |                                                                                                                                                                                                                                                                                                                                               
|J. Scott Burrows
        Calgary, Alberta, Canada  |  | Vice President, Finance and Chief Financial Officer      |  | Vice President, Finance and Chief Financial Officer since January 1, 2015; prior thereto, Vice President, Capital Markets of Pembina since September 2013; prior thereto, Vice President, Corporate Development and Investor Relations since March 2013; prior thereto, Senior Manager, Corporate Development and Planning since January 2012.



- 53 -







|Name and Residence                                  |  | Office with Pembina                                |  | Principal Occupation
        During the Past Five Years                                                                                                                                                                                                                               
|--------------------------------------------------- |  | -------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                    |  |                                                    |  |                                                                                                                                                                                                                                                                                       
|Robert M. Jones
        Calgary, Alberta, Canada    |  | Vice President, Midstream – Crude Oil & Condensate |  | Vice President, Midstream – Crude Oil & Condensate of Pembina since November 2008.                                                                                                                                                                                                    
|                                                    |  |                                                    |  |                                                                                                                                                                                                                                                                                       
|Andrew Gruszecki
        Calgary, Alberta, Canada   |  | Vice President, Oil Sands & Heavy Oil              |  | Vice President, Oil Sands & Heavy Oil of Pembina since October 2014; prior thereto, Vice President, Business Development from April 2012 to October 2014; prior thereto, Executive Vice President, Business Development of Provident Energy Ltd. from January 2006 to April 2012.     
|                                                    |  |                                                    |  |                                                                                                                                                                                                                                                                                       
|Robert D. Lock
        Calgary, Alberta, Canada     |  | Vice President, NGL Midstream                      |  | Vice President, NGL Midstream of Pembina since April 2012; prior thereto, Vice President, Supply and Extraction of Provident Energy Ltd. since 2005.                                                                                                                                  
|                                                    |  |                                                    |  |                                                                                                                                                                                                                                                                                       
|Jason T. Wiun
        Calgary, Alberta, Canada      |  | Vice President, Conventional Pipelines             |  | Vice President, Conventional Pipelines of Pembina since January 1, 2014; prior thereto, Vice President, Gas Services since September 2013; prior thereto, Senior Manager, Business Development, Conventional Pipelines since 2011.                                                    
|                                                    |  |                                                    |  |                                                                                                                                                                                                                                                                                       
|Jaret A. Sprott
        Calgary, Alberta, Canada    |  | Vice President, Gas Services                       |  | Vice President, Gas Services of Pembina since January 1, 2015; prior thereto, Senior Manager, Peace River Arch (Alberta Montney), Northern Operating Area of Encana Corporation since March 2013; prior thereto, Senior Manager, Bighorn (Deep Basin Cretaceous) since April 2012.    
|                                                    |  |                                                    |  |                                                                                                                                                                                                                                                                                       
|Debbie A. Sulkers
        Calgary, Alberta, Canada  |  | Vice President, Corporate Services                 |  | Vice President, Corporate Services of Pembina since June 2011; prior thereto, Vice President, Human Resources of SemCAMS ULC (a natural gas gathering and processing company) from October 2006 to April 2011.                                                                        
|                                                    |  |                                                    |  |                                                                                                                                                                                                                                                                                       
|Harold K. Andersen
        Calgary, Alberta, Canada |  | Vice President, Legal and General Counsel          |  | Vice President, Legal and General Counsel of Pembina since April 1, 2013; prior thereto, General Counsel of Pembina since December 2011; prior thereto, Partner and Associate at Stikeman Elliott LLP (a law firm) from June 2000 to December 2011.                                   
|                                                    |  |                                                    |  |                                                                                                                                                                                                                                                                                       
|Claudia D'Orazio
        Calgary, Alberta, Canada   |  | Vice President, Compliance and Risk                |  | Vice President, Compliance and Risk since October 2014; prior thereto, Vice President, Risk, Information Services and Procurement of Pembina since September 2013; prior thereto, Vice President, Risk and Treasurer since April 2012; prior thereto, Corporate Controller since 2006.



As at February 23, 2017, the directors and
executive officers of Pembina beneficially owned, or controlled or directed, directly or indirectly, an aggregate of
1,556,583 Common Shares, representing approximately 0.4  percent of the then outstanding Common Shares.



- 54 -







Conflicts of Interest



The directors and executive officers named
above may be directors or officers of entities which are in competition with or are customers or suppliers of Pembina. As such,
these directors or officers of Pembina may encounter conflicts of interest in the administration of their duties with respect to
Pembina. See "Risk Factors – General Risk Factors – Potential Conflicts of Interest."



AUDIT COMMITTEE INFORMATION



The Audit Committee's Charter



The Audit Committee Charter is set forth in
Appendix "A" to this Annual Information Form.



Composition of the Audit Committee and
Relevant Education and Experience



Pembina's Audit Committee is comprised of David
M.B. LeGresley, as Chairman, Anne-Marie Ainsworth, Gordon J. Kerr and Grant D. Billing each of whom is independent and financially
literate within the meaning of National Instrument 52–110 – Audit Committees and in accordance with Pembina's
Standards for Director Independence available at www.pembina.com. Set forth below are additional details regarding each member
of the Audit Committee.



David M.B. LeGresley



David M.B. LeGresley is the Chairman of the
Audit Committee and has been a member of the Audit Committee since April 2, 2012. Mr. LeGresley is independent within the
meaning of such term in National Instrument 52-110 – Audit Committees, and in accordance with the rules prescribed
by the SEC and the NYSE. Mr. LeGresley is a former executive of National Bank Financial and spent 12 years with that company, most
recently serving as Vice Chairman from 2006 to 2008. Prior to that assignment he was National Bank Financial's Executive Vice President
and Head of Corporate and Investment Banking (1999 to 2006); Managing Director and Head of Vancouver Investment Banking (1998 to
1999); and Managing Director, Investment Banking (1996 to 1998). Mr. LeGresley has extensive experience in the financial services
industry including positions at Salomon Brothers Canada from 1990 to 1996 and CIBC Wood Gundy from 1986 to 1990. He also serves
as a chairman and director of a TSX-listed company, Equitable Group Inc., as well as one private company, Woodland Biofuels Inc.
He is on the advisory committee for CANFAR (the Canadian Foundation for AIDS Research). Mr. LeGresley received a Bachelor
of Applied Science Degree in Engineering from the University of Toronto in 1981 and a Master of Business Administration from Harvard
Business School in 1986. He is a graduate of the Institute of Corporate Directors – Rotman Directors Education Program and
a member of the Institute of Corporate Directors. This business experience provides Mr. LeGresley with the skill set and financial
literacy required to carry out his duties as a member of the Audit Committee.



Anne-Marie N. Ainsworth





Anne-Marie N. Ainsworth has been a member of
the Audit Committee since October 7, 2014. Ms. Ainsworth is independent within the meaning of such term in National Instrument
52-110 – Audit Committees, and in accordance with the rules prescribed by the SEC and the NYSE. Ms. Ainsworthcurrently serves as a member of the board of directors and audit committee of Archrock, Inc. and Kirby Corporation. She
has served as President and Chief Executive Officer and a member of the Board of Directors of the general partner of Oiltanking
Partners, L.P. and as President and Chief Executive Officer of Oiltanking Holding Americas, Inc. from November 2012 to March 2014.
Ms. Ainsworth previously held the position of Senior Vice President of Refining of Sunoco Inc. from November 2009 until March 2012.
Prior to joining Sunoco, Ms. Ainsworth was employed by Motiva Enterprises, LLC, where she was the General Manager of the Motiva
Norco Refinery in Norco, Louisiana from 2006 to 2009. From 2003 to 2006 Ms. Ainsworth was Director of Management Systems &
Process Safety at Shell Oil Products U.S., and from 2000 to 2003 she was Vice President of Technical Assurance at Shell Deer Park
Refining Company. Ms. Ainsworth holds a Master of Business Administration degree from Rice University, where she served as an adjunct
professor from October 2000 to October 2009, and a Bachelor of Science degree in Chemical Engineering from the University of Toledo.
This business experience provides Ms. Ainsworth with the skill set and financial literacy required to carry out her duties as a
member of the Audit Committee.



- 55 -







Grant D. Billing



Grant D. Billing has been a member of the Audit
Committee since April 2, 2012. Mr. Billing is independent within the meaning of such term in National Instrument 52-110 –
Audit Committees, and in accordance with the rules prescribed by the SEC and the NYSE. Mr. Billing currently serves on the
board of directors and audit committees of Badger Daylighting Ltd. and Cortex Business Solutions Inc. and on the board of directors
of Tervita Corporation. Mr. Billing was the Chairman and Chief Executive Officer of Superior Plus Corp. from 2006 to 2011, and
prior thereto the Executive Chairman since 1998. Mr. Billing has extensive strategic and business experience gained over a period
of more than 30 years in various CEO/senior management capacities, including as President and CEO of Norcen Energy Resources Ltd.
He has served as chairman and director of a number of public companies, as well as the Canadian Association of Petroleum Producers.
He holds a Bachelor of Science degree from the University of Calgary. This experience, coupled with his designation as a Chartered
Accountant, received in 1976, provide Mr. Billing with the skill set and financial literacy required to carry out his duties as
a member of the Audit Committee.



Gordon J. Kerr



Mr.
Kerr has been a member of the Audit Committee since February 27, 2015. Mr. Kerr is independent within the meaning of such term
in National Instrument 52-110 –Audit Committees, and in accordance with the rules
prescribed by the SEC and the NYSE. Mr. Kerr is a member of the Management Advisory Council of the Haskayne School of Business
at the University of Calgary. Mr. Kerr is a former President and Chief Executive Officer of Enerplus Corporation, a position he
held from May 2001 until July 2013. He is also a past Chairman of the Canadian Association of Petroleum Producers, a former director
of Deer Creek Energy Limited and a past member of the Canadian Council of Chief Executives. Since beginning his career in 1979,
he has gained extensive management experience in leadership positions at various oil and gas companies.



Mr.
Kerr commenced employment with Enerplus Corporation and its predecessors in 1996, holding positions of increasing responsibility,
including the positions of Chief Financial Officer and Executive Vice President. Mr. Kerr graduated from the University of Calgary
in 1976 with a Bachelor of Commerce degree. He received a Chartered Accountant designation and was admitted as a member of the
Institute of Chartered Accountants of Alberta in 1979 and was later appointed a Fellow of the Institute of Chartered Accountants
of Alberta in February 2011. This business experience provides Mr. Kerr with the skill set and financial literacy required to carry
out his duties as a member of the Audit Committee.



Pre-Approval Policies and Procedures for
Audit and Non-Audit Services



As outlined in Pembina's Audit Committee
Charter and the terms of engagement with Pembina's external auditors, the Audit Committee of the Board is directly responsible
for overseeing the relationship, reports, qualifications, independence and performance of the external auditor and audit services
by other registered public accounting firms engaged by Pembina. The Audit Committee has the authority and responsibility to recommend
the appointment and the revocation of the appointment of the external auditors engaged for the purpose of preparing or issuing
an audit report or performing other audit, review or attest services, and to fix their remuneration. The external auditor reports
directly to the Audit Committee. The Audit Committee's appointment of the external auditor is subject to annual approval by the
Shareholders.



The Audit Committee is also responsible for
the pre-approval of all permissible non-audit services to be provided by the external auditors considering the potential impact
of such services on the independence of external auditors and, subject to any de minimis exemption available under applicable
laws. Such approval can be given either specifically or pursuant to preapproval policies and procedures adopted by the committee
including the delegation of this ability to one or more members of the Audit Committee to the extent permitted by applicable law,
provided that any pre-approvals granted pursuant to any such delegation must be detailed as to the particular service to be provided,
may not delegate Audit Committee responsibilities to management of Pembina, and must be reported to the full Audit Committee at
the first scheduled meeting of the Audit Committee following such pre-approval.



- 56 -







External Auditor Service Fees



The following table sets out the fees billed
to Pembina for professional services provided by KPMG during each of the last two financial years:



|Year |  | Audit Fees(1) |           |  | Audit-Related 
Fees(2) |   |        | Tax Fees(3) |  |   | All Other Fees(4)
|---- |  | ------------- | --------- |  | ---------------------- | - | ------ | ----------- |  | - | -----------------
|2016 |  | $             | 2,067,100 |  |                        | $ | 30,000 |             |  | $ | 639,918          
|2015 |  | $             | 1,890,550 |  |                        | $ | 30,000 |             |  | $ | 800,769          



Notes:

| | (1) | Audit fees were for professional services rendered by KPMG
for the audit of Pembina's annual financial statements and reviews of Pembina's quarterly financial statements, as well as services
provided in connection with statutory and regulatory filings or engagements. In 2016, fees included additional expense for Pembina's
prospectus supplements in relation to the offerings of Series 11 and Series 13 Class A Preferred Shares, Common Shares and Medium
Term Notes, Series 7, and associated French translations. In 2015, fees included additional expense for Pembina's base shelf prospectus
and prospectus supplements in connection with the offerings of Common Shares, Medium Term Notes, Series 5, 6 and the re-openings
of Series 3 and the offering of the Series 9 Class A Preferred Shares, and associated French translations.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Audit-related fees are for assurance and related services reasonably related to the performance
of the audit or review of Pembina's financial statements and not reported under "Audit Fees" above. 2015 and 2016
fees included audit fees for the pension plan audit.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Tax fees were for tax compliance of $190,050 (2015: $94,694) and tax advice and tax planning of
$449,868 (2015: $706,075). In addition to the 2016 fees stated above, KPMG billed $92,415 in 2017 prior to the date hereof. The
fees were for non-audit tax services. 2015 and 2016 fees included general tax consultation and tax compliance fees incurred for
preparing and filing the tax returns for Pembina's subsidiaries.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | All other fees are fees for products and services provided by Pembina's auditors other than those
described as "Audit Fees", "Audit-related Fees" and "Tax Fees."
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



RISK FACTORS



The following information is a summary only
of certain risk factors relating to Pembina or an investment in securities of Pembina or its subsidiaries and is qualified in its
entirety by reference to, and must be read in conjunction with, the detailed information appearing elsewhere in this Annual Information
Form. Shareholders and prospective investors should carefully consider these risk factors before investing in Pembina's securities,
as each of these risks may negatively affect the trading price of Pembina's securities, the amount of dividends paid to Shareholders
and holders of Class A Preferred Shares and the ability of Pembina to fund its debt obligations, including debt obligations under
its outstanding Series F Convertible Debentures, Medium Term Notes and any other debt securities that Pembina may issue from time
to time.



Investors should carefully consider the
risk factors set out below and consider all other information contained herein and in Pembina's other public filings before making
an investment decision.



Pembina's value proposition is based on balancing
economic benefit against risk. Where appropriate, Pembina will reduce risk. Pembina continually works to mitigate the impact of
potential risks to its business by identifying all significant risks so that they can be appropriately managed. To assist with
identifying risk, Pembina has implemented a comprehensive Risk Management Program.



- 57 -







Risks Inherent in Pembina's Business



Operational Risks



Operational risks include: pipeline leaks;
the breakdown or failure of equipment, pipelines and facilities, information systems or processes; the compromise of information
and control systems; the performance of equipment at levels below those originally intended (whether due to misuse, unexpected
degradation or design, construction or manufacturing defects); spills at truck terminals and hubs; spills associated with the loading
and unloading of harmful substances onto rail cars and trucks;failure to maintain adequate supplies of spare parts; operator
error; labour disputes; disputes with interconnected facilities and carriers; operational disruptions or apportionment on third-party
systems or refineries which may prevent the full utilization of Pembina's facilities and pipelines; and catastrophic events including
but not limited to natural disasters, fires, floods, explosions, train derailments, earthquakes, acts of terrorists and saboteurs,
and other similar events, many of which are beyond the control of Pembina. Pembina may also be exposed from time to time, to additional
operational risks not stated in the immediately preceding sentences. The occurrence or continuance of any of these events could
increase the cost of operating Pembina's assets or reduce revenue, thereby impacting earnings. Additionally, Pembina's facilities
and pipelines are reliant on electrical power for their operations. A failure or disruption within the local or regional electrical
power supply or distribution or transmission systems could significantly affect ongoing operations. Further, a significant increase
in the cost of power or fuel could have a materially negative effect on the level of profit realized in cases where the relevant
contracts do not provide for recovery of such costs.



Pembina is committed to preserving customer
and Shareholder value by proactively managing operational risk through safe and reliable operations. Senior managers are responsible
for the daily supervision of operational risk by ensuring appropriate policies, procedures and systems are in place within their
business units and internal controls are operating efficiently. Pembina also has an extensive program to manage system integrity,
which includes the development and use of in-line inspection tools and various other leak detection technologies. Pembina's maintenance,
excavation and repair programs are focused on risk mitigation and, as such, resources are directed to the areas of greatest benefit
and infrastructure is replaced or repaired as required. Pembina carries insurance coverage with respect to some, but not all, casualty
occurrences in amounts customary for similar business operations, which coverage may not be sufficient to compensate for all casualty
occurrences. In addition, Pembina has a comprehensive Corporate Security Management Program designed to reduce security-related
risks.



Commodity Price Risk



Pembina's Midstream business includes
activities related to product storage, terminalling, and hub services. These activities expose Pembina to certain risks
including that Pembina may experience volatility in revenue, and impairments related to the book value of stored product, due
to fluctuations in commodity prices. Primarily, Pembina enters into contracts to purchase and sell crude oil and NGL at
floating market prices. The prices of products that are marketed by Pembina are subject to volatility as a result of such
factors as seasonal demand changes, extreme weather conditions, market inventory levels, general economic conditions, changes
in crude oil markets and other factors. Pembina manages its risk exposure by balancing purchases and sales to lock-in
margins. Notwithstanding Pembina's management of price and quality risk, marketing margins for commodities can vary and have
varied significantly from period to period. This variability could have an adverse effect on the results of Pembina's
commercial Midstream business and its overall results of operations. To assist in effectively smoothing that variability
inherent in this business, Midstream is investing in assets that have a fee-based revenue component, and is looking to expand
this area going forward.



The Midstream business is also exposed to possible
price declines between the time Pembina purchases NGL feedstock and sells NGL products, and to decreasing frac spreads. Frac spread
is the difference between the sale prices of NGL products and the cost of NGL sourced from natural gas and acquired at natural
gas related prices. Frac spreads can change significantly from period to period depending on the relationship between NGL and
natural gas prices (the "frac spread ratio"), absolute commodity prices, and changes in the Canadian to U.S. dollar
foreign exchange rate. There is also a differential between NGL product prices and crude oil prices which can change margins realized
for midstream products separate from frac spread ratio changes. The amount of profit or loss made on the extraction portion of
the NGL midstream business will generally increase or decrease with frac spreads. This exposure could result in variability of
cash flow generated by the NGL midstream business, which could affect Pembina and the cash dividends that Pembina is able to distribute.



- 58 -







Pembina responds to commodity price risk
by using an active Risk Management Program to fix revenues to pay for a minimum of 50 percent of the fixed committed term
natural gas supply costs. Pembina's fixed committed plus discretionary natural gas supply can vary from year to year
based on industry dynamics. Additionally, Pembina's Midstream business is also exposed to variability in quality, time and
location differentials. The Company may also utilize commodity-related derivative instruments as part of its overall risk
management strategy to assist in managing the exposure to commodity prices, as well as interest rates, cost of power and
foreign exchange risk. The Company does not trade financial instruments for speculative purposes. Commodity price
fluctuations and volatility can also impact producer activity and throughput in Pembina's infrastructure, as set out
below.



For more information with respect to Pembina's financial instruments and financial risk management program, see Note 24 to Pembina's Financial Statements, which note
is incorporated by reference herein.



Reserve Replacement, Throughput and
Product Demand



Pembina's Conventional Pipeline tariff revenue
is based upon a variety of tolling arrangements, including fee-for-service, cost-of-service agreements and market-based tolls.
As a result, certain pipeline tariff revenue is heavily dependent upon throughput levels of crude oil, NGL and condensate. Future
throughput on Pembina's crude oil and NGL pipelines and replacement of oil and gas reserves in the service areas will be dependent
upon the activities of producers operating in those areas as they relate to exploiting their existing reserve bases and exploring
for and developing additional reserves, and technological improvements leading to increased recovery rates. Similarly, the volumes
of natural gas processed through Pembina's gas processing assets depends on production of natural gas in the areas serviced by
the gas processing business and associated pipelines. Without reserve additions, or expansion of the service areas, volumes on
such pipelines and in such facilities would decline over time as reserves are depleted. As oil and gas reserves are depleted, production
costs may increase relative to the value of the remaining reserves in place, causing producers to shut-in production or seek out
lower cost alternatives for transportation. If the level of tariffs collected by Pembina decreases as a result, cash flow available
for dividends to Shareholders and to service obligations under Pembina's debt securities and Pembina's other debt obligations could
be adversely affected.



Over the long-term, the ability and willingness
of shippers to continue production, and as a consequence, Pembina's business, will also depend, in part, on the level of demand
and prices for crude oil, condensate, NGL and natural gas in the markets served by the crude oil and NGL pipelines and gas processing
and gathering infrastructure in which Pembina has an interest. Producers may shut-in production at lower product prices or higher
production costs.



Global economic events may continue to have
a substantial impact on the prices of such products. Pembina cannot predict the impact of future supply/demand or economic conditions,
fuel conservation measures, alternative fuel requirements, governmental regulation or technological advances in fuel economy and
energy generation devices on the energy and petrochemical industries or future demand for and prices of natural gas, crude oil,
condensate and NGL. A lower commodity price environment will generally reduce drilling activity, and as a resultthe supply
growth that has been fuelling the growth in midstream infrastructure could slow down. Producers in the areas serviced by the business
may not be successful in exploring for and developing additional reserves or achieving technological improvements to increase recovery
rates and production costs given lower commodity prices, and the gas plants and the pipelines may not be able to maintain existing
volumes of throughput. These factors could negatively affect pipeline and processing capacity value as transportation and processing
capacity becomes more abundant. Future prices of these products are determined by supply and demand factors, including weather
and general economic conditions as well as economic, political and other conditions in other oil and natural gas regions, all of
which are beyond Pembina's control. Lower production volumes will also increase the competition for natural gas supply at gas processing
plants which could result in higher shrinkage premiums being paid to natural gas producers.



The rate and timing of production from proven
natural gas reserves tied into the gas plants is at the discretion of the producers and is subject to regulatory constraints. The
producers have no obligation to produce natural gas from these lands. Pembina's gas processing assets are connected to various
third-party trunk line systems. Operational disruptions or apportionment on those third-party systems may prevent the full utilization
of the business.



- 59 -







Customer Contracts



Throughput on Pembina's pipelines is or will
be governed by transportation contracts or tolling arrangements with various producers of petroleum products. In addition, Pembina
is party to numerous contracts of varying durations in respect of its gas gathering, processing and fractionation facilities as
well as terminalling and storage services. Any default by counterparties under such contracts or any expiration of such contracts
or tolling arrangements without renewal or replacement may have an adverse effect on Pembina's business. Further, some of the contracts
associated with the services described above are comprised of a mixture of firm and non-firm contracts and the revenue that Pembina
earns on contracts which are based on non-firm or firm without take-or-pay service is dependent on the volume of natural gas, NGL,
crude oil and condensate produced by producers in the relevant geographic areas. Accordingly, lower than historical production
volumes in these areas (for reasons such as low commodity prices) may have an adverse effect on Pembina's revenue. See "Description
of Pembina's Business and Operations — Oil Sands & Heavy Oil Business", "Description of Pembina's
Business and Operations — Conventional Pipelines Business", and "Description of Pembina's Business
and Operations – Gas Services Business."



Reputation



Reputational risk is the potential market or
company specific events that could result in the deterioration of Pembina's reputation with key stakeholders. The potential for
harming Pembina's corporate reputation exists in every business decision and all risks can have an impact on reputation, which
in turn can negatively impact Pembina's business and its securities. Reputational risk cannot be managed in isolation from other
forms of risk. Credit, market, operational, insurance, liquidity, regulatory and legal, technology risks, among others, must all
be managed effectively to safeguard Pembina's reputation. Pembina's reputation could also be impacted by the actions and activities
of other companies operating in the energy industry, particularly other energy infrastructure providers, over which it has no control.
In particular, Pembina's reputation could be impacted by negative publicity related to pipeline incidents, unpopular expansion
plans or new projects, and due to opposition from organizations opposed to energy, oil sands and pipeline development and particularly
with shipment of production from oil sands regions. Negative impacts from a compromised reputation could include revenue loss,
reduction in customer base, delays in obtaining regulatory approvals with respect to growth projects, and decreased value of Pembina's
securities.



Environmental Costs and Liabilities



Pembina's operations, facilities and petroleum
product shipments are subject to extensive national, regional and local environmental, health and safety laws and regulations governing,
among other things, discharges to air, land and water, the handling and storage of petroleum products and hazardous materials,
waste disposal, the protection of employee health, safety and the environment, and the investigation and remediation of contamination.
Pembina's facilities could experience incidents, malfunctions or other unplanned events that result in spills or emissions in excess
of permitted levels and result in personal injury, fines, penalties or other sanctions and property damage. Pembina could also
incur liability in the future for environmental contamination associated with past and present activities and properties. The facilities
and pipelines must maintain a number of environmental and other permits from various governmental authorities in order to operate,
and these facilities are subject to inspection from time to time. Failure to maintain compliance with these requirements could
result in operational interruptions, fines or penalties, or the need to install additional pollution control technology. Licenses
and permits must be renewed from time to time and there is no guarantee that a license or permit will be renewed on the same or
similar conditions. There can be no assurance that Pembina will be able to obtain all of the licenses, permits, registrations,
approvals and authorizations that may be required to conduct operations that it may wish to undertake. Further, if at any time
regulatory authorities deem any one of Pembina's pipelines or facilities unsafe or not in compliance with applicable laws, they
may order it to be shut down. Certain significant environmental legislative initiatives that may materially impact Pembina's business
and financial results and conditions are outlined below.



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In 2016, the Canadian federal government
announced that its initial proposed pan-Canadian carbon tax will be $10 per tonne commencing in 2018 and will escalate to $50
per tonne by 2022. In Alberta, the provincial government launched consultation on three separate initiatives under the Climate
Change Act that are part of the Alberta Climate Leadership Plan. These recommendations included a new carbon levy on all
carbon emissions commencing on January 1, 2017, revisions to the current large facility emitters program and a proposed
framework for the reduction of methane from fugitive and vented gas emissions. All Pembina business entities within Alberta
have obtained exemption certification from the carbon levy for the majority of its business activities, which will limit
Pembina's exposure to the levy until those exemptions expire in 2023. Where applicable, business entities have also obtained
licences under the carbon levy regulations for the buying and selling of regulated fuels without the need to recover and
remit the carbon levy on those fuel transactions. Nevertheless, until the government develops regulations for the additional
initiatives under the Climate Change Leadership Plan, the impact to Pembina's business cannot be fully assessed and such
impact could be material to Pembina's operations and financial results and conditions. Through active participation with
industry associations and direct engagement with regulatory bodies, Pembina will continue to monitor and assess for material
impacts to Pembina's business as regulations and policies are developed.



In 2015, the Government of Alberta also advised
that it would renew and update Alberta's Specific Gas Emitter Regulation ("SGER") which currently governs carbon
emissions from large emitter facilities. As a result, by 2017 the SGER will require large emitters to reduce their emissions by
20 percent up from the previous 12 percent base levels, and will result in an increase in the price of carbon offset from $15/tonne
of CO2e to $20/tonne of CO2e in 2016 and $30/tonne of CO2e in 2017. Pembina currently has one
facility participating in the SGER program and the regulation may trigger additional facilities in the future due to recent expansions
that are now becoming operational. Currently, the impacts of SGER to Pembina are minimal. The Alberta Government is assessing the
current SGER program which expires at the end of 2017 and is proposing to replace SGER with a revised regulatory framework at the
time of expiration. Pembina is actively monitoring and assessing for impacts to Pembina's business as regulations and policies
are developed, and such impacts could be material to Pembina's operations and financial results.



Additionally, oil sands facilities are currently
charged a SGER levy based on each individual facility’s historical emissions, irrespective of how intense (e.g. tonnes of
GHG per barrel produced) or efficient that operation has been. The Government of Alberta, in its climate change legislation and
guidelines, is also transitioning oil sands facilities from SGER to an output-based allocation approach for the carbon price
and will legislate an overall limit to oil sands GHG emissions. The legislated emissions limit on oil sands operations will be
a maximum 100 megatonnes in any year; currently oil sands operations emit roughly 70 megatonnes per year. This legislated change
may limit oil sands production growth in the future.



Similar policy reviews on climate change are
underway in British Columbia and Ontario. In 2016, Ontario introduced two regulations under the Ontario Climate Change Act,
the Cap and Trade Program Regulations ("Cap-and-Trade Regulations"), which took effect on July 1, 2016,
and the Quantification, Reporting and Verification of Greenhouse Gas Emissions Regulations ("Emissions Regulation"),
which took effect on January 1, 2017. As a product supplier of propane, Pembina is required to offset the carbon emissions from
the product sold to market. Pembina is fully registered under the Cap-and Trade Regulations and the Emissions Regulation, and the
product pricing adjustments have been initiated for transactions starting on January 1, 2017 to recover/offset our anticipated
compliance costs.



While Pembina believes its current operations
are in compliance with all applicable significant environmental and safety regulations, there can be no assurance that substantial
costs or liabilities will not be incurred. Moreover, it is possible that other developments, such as changes in environmental and
safety laws, regulations and enforcement policies thereunder, claims for damages to persons or property resulting from Pembina's
operations, and the discovery of any new pre-existing environmental liabilities in relation to any of Pembina's existing or future
properties or operations, could result in significant costs and liabilities to Pembina. If Pembina is not able to recover the resulting
costs or increased costs through insurance or increased tariffs, cash flow available to pay dividends to Shareholders and to service
obligations under Pembina's debt securities and Pembina's other debt obligations could be adversely affected.



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Changes in environmental and safety regulations
and legislation are also likely to impact Pembina's customers and could result in development and production becoming uneconomical,
which would impact throughput and revenue on Pembina's systems and in its facilities. See "Reserve Replacement, Throughput
and Product Demand."



While Pembina maintains insurance in respect
of damage caused by seepage or pollution in an amount it considers prudent and in accordance with industry standards, certain provisions
of such insurance may limit the availability thereof in respect of certain occurrences unless they are discovered within fixed
time periods, which typically range from 72 hours to 30 days. Although Pembina believes it has adequate pipeline monitoring
systems in place to monitor for a significant spill of product, if Pembina is unaware of a problem or is unable to locate the problem
within the relevant time period, insurance coverage may lapse and not be available.



Regulation and Legislation



Legislation in Alberta and British Columbia
exists to ensure that producers have fair and reasonable opportunities to produce, process and market their reserves. In Alberta,
the AER and in British Columbia, the BCUC, may, on application and following a hearing (and in Alberta with the approval of
the Lieutenant Governor in Council), declare the operator of a pipeline a common carrier of oil or NGL and, as such, must not discriminate
between producers who seek access to the pipeline. Producers and shippers may also apply to the regulatory authorities for a review
of tariffs, and such tariffs may then be regulated if it is proven that the tariffs are not just and reasonable. Applications by
producers to have a pipeline operator declared a common carrier are usually accompanied by a request to have the regulatory authorities
establish the conditions under which the carrier must accept and carry product, including the tolls that may be charged by the
common carrier. The extent to which regulatory authorities in such instances can override existing transportation or processing
contracts has not been fully decided. The potential for direct regulation of tolls, other than for the majority of Pembina's provincially
regulated B.C. Pipelines, while considered remote by Pembina, could result in toll levels that are less advantageous to Pembina
and could impair the economic operation of such regulated pipeline systems.



Since 2014, the AER is the primary regulatory
body that Pembina deals with related to Alberta-issued energy permits, with some minor exceptions. In 2017, Pembina will continue
to monitor for legislative or procedural changes that could impose an administrative or financial burden on the Company as a result
of a single regulator. Additionally, certain of Pembina's subsidiaries own pipelines in B.C., which are regulated by the BCUC,
and pipelines that cross provincial or international boundaries, which are regulated by the NEB. Certain of Pembina's operations
and expansion projects are subject to additional regulations, and as Pembina's operations expand throughout Canada and North American,
Pembina may be required to comply with the requirements of additional regulators and legislative bodies, including the Canadian
Environmental Assessment Agency ("CEAA"), the British Columbia Environmental Assessment Office ("BCEAO"),
the Ontario Ministry of Natural Resources, the Saskatchewan Ministry of Economy, and The Petroleum Branch of Manitoba Mineral Resources.
In the U.S., tolls on pipelines are regulated by and reported to the Federal Energy Regulatory Commission ("FERC")
and pipeline operations are governed by the Pipeline and Hazardous Materials Safety Administration ("PHMSA"),
which sets standards for the design, construction, pressure testing, operation and maintenance, corrosion control, training and
qualification of personnel, accident reporting and record keeping. The Office of Pipeline Safety, within PHMSA, inspects and enforces
the pipeline safety regulations across the U.S. All regulations and environmental compliance obligations are subject to change
at the initiative of the governing body. Pembina continually monitors existing and changing regulations in all jurisdictions in
which it currently operates or into which it may expand in the future, and their implications to its operations. However, Pembina
cannot predict future regulatory changes, and any such compliance and regulatory changes in any one or multiple jurisdictions could
have a material adverse impact on Pembina, its financial results and its Shareholders.



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In 2015, the Government of Canada issued 30
federal mandate letters. The mandate letter for Minister McKenna was to set up an expert panel to review the environmental and
regulatory processes associated with the CEAA. The mandate letter to Minister Carr is for the assessment of a broad range of issues
related to the purpose, mandate, structure and role of the NEB. The mandate letter to Minister LeBlanc is to assess whether the
changes made to the Fisheries Act in 2012 should be reversed. The mandate letter to Minister Garneau is to assess the changes
made to the Navigation Protection Act in 2012 and whether they should be reversed. Pembina continues to actively monitor
these and other regulatory initiatives but cannot predict the outcome of these and similar reviews under way under the new political
regime in Canada. Resulting changes to the regulatory processes could materially impact Pembina's business and financial results,
directly as well as indirectly, by impacting the financial condition of its customers and, ultimately, production levels and throughput
on Pembina's pipelines and in its facilities.



Recent political events in the U.S.
have led to uncertainty regarding ongoing trade relationships, in particular in relation to the North American Free
Trade Agreement ("NAFTA”). While the current U.S. administration has indicated its intention to renegotiate
or withdraw from NAFTA, there have been no formal steps taken in this regard to date. As such, at this time Pembina's is unable
to predict what impact any such renegotiation or withdrawal may have; however, in the event that any renegotiation or
withdrawal impacts the exports of energy resources to the U.S. or Mexico this could have a material adverse effect on
Pembina’s business and financial condition, directly as well as indirectly by negatively impacting Pembina's customers'
cash flow and production levels.



Pembina's business and financial condition
could also be influenced by federal and foreign legislation affecting, in particular, foreign investment, through legislation such
as the Competition Act (Canada) and the Investment Canada Act (Canada), and their equivalents in foreign jurisdictions.



There can be no assurance that income tax laws,
regulatory and environmental laws or policies and government incentive programs relating to the pipeline or oil and natural gas
industry, will not be changed in a manner which adversely affects Pembina or its Shareholders or other security holders.



See "Description of Pembina's Business
and Operations – Conventional Pipelines Business – Other Information – Industry Regulation."



Abandonment Costs



Pembina is responsible for compliance with
all applicable laws and regulations regarding the dismantling, decommissioning and site disturbance remediation activities and
abandonment of its pipeline systems and other assets at the end of their economic life, and these abandonment costs may be substantial.
An accounting provision is made for the estimated cost of site restoration and capitalized in the relevant asset category. A provision
is recognized if, as a result of a past event, Pembina has a present legal or constructive obligation that can be estimated reliably,
and it is probable that an outflow of economic benefits will be required to settle the obligation. Pembina's estimates as to the
costs of such abandonment or decommissioning could be materially less than the actual costs incurred.



For more information with respect to Pembina's
estimated net present value of decommissioning obligations, see Note 15 to Pembina's Financial Statements for the year ended December
31, 2016, which note is incorporated by reference herein. Electronic copies of this document can be found on Pembina's profile
on the SEDAR website at www.sedar.com and the EDGAR website at www.sec.gov.



The proceeds of the disposition of certain
assets, including in respect of certain pipeline systems and line fill, may be available to offset abandonment costs. While Pembina
estimates future abandonment costs, actual costs may differ. Pembina may, in the future, determine it prudent or be required by
applicable laws or regulations to establish and fund additional reclamation funds to provide for payment of future abandonment
costs. Such reserves could decrease cash flow available for dividends to Shareholders and to service obligations under Pembina's
debt securities and Pembina's other debt obligations.



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Pembina has complied with the NEB requirements
on its NEB-regulated pipelines for the creation of abandonment funds and has completed the compliance-based filings that are required
under the applicable NEB rules and regulations regarding the abandonment of its pipeline systems and assets. Pembina also has a
50 percent ownership in an NEB-regulated pipeline lateral which is operated by a joint venture partner, and has paid its share
of required abandonment funds into trust. The joint venture partner is responsible for the submission of the NEB-compliance based
filings for this asset. Pembina will continue to monitor any regulatory changes prior to the next five-year review and will complete
the annual reporting as required by the NEB. Pembina owned and/or operated rate-regulated pipelines account for approximately 872.5
km of the total infrastructure in the Conventional Pipelines business.



Completion and Timing of Expansion Projects



The successful completion of Pembina's growth
and expansion projects is dependent on a number of factors outside of Pembina's control, including the impact of general economic,
business and market conditions, availability of capital at attractive rates, receipt of regulatory approvals, reaching long-term
commercial arrangements with customers in respect of certain portions of the expansions, construction schedules and costs that
may change depending on supply, demand and/or inflation, labour, materials and equipment availability, contractor non-performance,
weather conditions, and cost of engineering services. There is no certainty, nor can Pembina provide any assurance, that necessary
regulatory approvals will be received on terms that maintain the expected return on investment associated with a specific projects,
or at all, or that satisfactory commercial arrangements with customers will be reached where needed on a timely basis or at all,
or that third parties will comply with contractual obligations in a timely manner. Factors such as special interest group opposition,
Aboriginal, landowner and other stakeholder consultation requirements, changes in shipper support over time, and changes to the
legislative or regulatory framework could all have an impact on contractual and regulatory milestones being accomplished. As a
result, the cost estimates and completion dates for Pembina's major projects can change during different stages of the project.
Early stage projects face additional challenges including securing leases, easements, rights-of-way, permits and/or licenses from
landowners or governmental authorities allowing access for such purposes, as well as Aboriginal consultation requirements. Accordingly,
actual costs and timing estimates may vary from initial estimates and these differences can be significant, and certain projects
may not proceed as planned, or at all. Further, there is a risk that maintenance will be required more often than currently planned
or that significant maintenance capital projects could arise that were not previously anticipated.



Under most of Pembina's construction and operation
agreements, the Company is obligated to construct the facilities regardless of delays and cost increases and Pembina bears the
risk for any cost overruns and future agreements with customers entered into with respect to expansions may contain similar conditions.
While Pembina is not currently aware of any significant undisclosed cost overruns at the date hereof, any such cost overruns in
the future may adversely affect the economics of particular projects, as well as Pembina's business operations and financial results,
and could reduce Pembina's expected return on investment which, in turn, could reduce the level of cash available for dividends
and to service obligations under Pembina's debt securities and other debt obligations. See "General Risk Factors –
Additional Financing and Capital Resources" and "Shipper and Processing Contracts" below.



Operating and Capital Costs



Operating and capital costs of Pembina's business
may vary considerably from current and forecast values and rates and represent significant components of the cost of providing
service. In general, as equipment ages, costs associated with such equipment may increase over time. Dividends may be reduced if
significant increases in operating or capital costs are incurred and this may also impact the ability of Pembina to service obligations
under its debt securities and other debt obligations.



Although operating costs are to be recaptured
through the tariffs charged on natural gas volumes processed and oil and NGL transported, respectively, to the extent such charges
escalate, producers may seek lower cost alternatives or stop production of their natural gas and/or crude oil.



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Possible Failure to Realize Anticipated
Benefits of Corporate Strategy



Pembina evaluates the value proposition for
expansion projects, new acquisitions or divestitures on an ongoing basis. Planning and investment analysis is highly dependent
on accurate forecasting assumptions and to the extent that these assumptions do not materialize, financial performance may be lower
or more volatile than expected. Volatility in the economy, change in cost estimates, project scoping and risk assessment could
result in a loss in profits for Pembina. Large scale acquisitions in particular may involve significant pricing and integration
risk. As part of its ongoing strategy, Pembina may complete acquisitions of assets or other entities in the future. Achieving the
benefits of completed and future acquisitions depends in part on successfully consolidating functions and integrating operations,
procedures and personnel in a timely and efficient manner, as well as Pembina's ability to realize the anticipated growth opportunities
and synergies from combining the acquired businesses and operations with those of Pembina. The integration of acquired businesses
and entities requires the dedication of substantial management effort, time and resources which may divert management's focus and
resources from other strategic opportunities and from operational matters during this process. The integration process may result
in the loss of key employees and the disruption of ongoing business, customer and employee relationships that may adversely affect
Pembina's ability to achieve the anticipated benefits of any acquisitions. Acquisitions may also expose Pembina to additional risks,
including entry into markets or businesses in which Pembina has little or no direct prior experience, increased credit risks through
the assumption of additional debt, costs and contingent liabilities and exposure to liabilities of the acquired business or assets.
See "General Risk Factors – Additional Financing and Capital Resources" below.



Risks Relating to Crude Oil/NGL by Rail



Pembina's operations include rail loading,
offloading and terminalling facilities. Pembina relies on railroads and trucks to distribute its products for customers as well
as to transport raw materials to its processing facilities. Costs for environmental damage, damage to property and personal injury
in the event of a railway incident involving hydrocarbons have the potential to be significant and liabilities to Pembina are possible.
At this time, the Railway Safety Act (Canada), which governs the operation of railway equipment, does not contemplate regulatory
enforcement proceedings against shippers, but consignors and shippers may be subject to regulatory proceedings under the Transportation
of Dangerous Goods Act(Canada), which specifies the obligations of shippers to identify and classify dangerous goods, select
appropriate equipment and prepare shipping documentation. While the Canada Transportation Act was amended in 2015 to preclude
railway companies from shifting liability for third party claims to shippers by tariff publication alone, major Canadian railways
have adopted standard contract provisions designed to implement such a shift. Under various environmental statutes in both Canada
and the United States, Pembina could be held responsible for environmental damage caused by hydrocarbons loaded at its facilities
or being carried on its leased rail cars. Pembina partially mitigates this risk by securing insurance coverage.



Railway incidents in Canada and the United
States have prompted regulatory bodies to initiate reviews of transportation rules and publish various directives. Regulators in
Canada and the United States have begun to phase-in more stringent engineering standards for tank cars used to move petroleum products
which will require all North American tank cars carrying crude oil or ethanol that do not currently meet these standards to be
retrofitted by May 1, 2017, and will require all tank cars carrying flammable liquids to be compliant by May 1, 2025. While most
legislative changes apply directly to railway companies, costs associated with retrofitting locomotives and rail cars, implementing
safety systems, increased inspection and reporting requirements may be indirectly passed on to Pembina through increased freight
rates and car leasing costs. In addition, regulators in Canada and the United States have implemented changes that impose obligations
relating to certification of product and equipment procedures and emergency response procedures, directly on consignors and shippers
such as Pembina.



In the event that Pembina is ultimately held
liable for any damages resulting from its activities relating to transporting crude oil/NGL by rail, for which insurance is not
available, or increased costs or obligations are imposed on Pembina as a result of new regulations, this could have an impact on
Pembina's business, operations and prospects and could impact earnings and cash flow available to pay dividends and to service
obligations under Pembina's debt securities and other debt obligations.



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Competition



Pembina competes with other pipelines, midstream,
marketing and gas processing and handling services providers in its service areas as well as other transporters of crude oil and
NGL. The introduction of competing transportation alternatives into Pembina's service areas could potentially have the impact of
limiting Pembina's ability to adjust tolls as it may deem necessary and result in the reduction of throughput in Pembina's pipelines.
Additionally, potential pricing differentials on the components of NGL may result in these components being transported by competing
gas pipelines. Pembina believes it is prepared for and determined to meet these existing and potential competitive pressures.
Pembina also competes with other businesses for growth and business opportunities, which could impact its ability to grow through
acquisitions. See "Conventional Pipelines Business – Competitive Environment", "Oil Sands and Heavy
Oil Business – Competitive Environment", "Gas Services Business – Competitive Environment"
and "Midstream Business – Competitive Environment."



Reliance on Principal Customers and
Operators



Pembina relies on several significant customers
to purchase product from the Midstream business. If for any reason these parties were unable to perform their obligations under
the various agreements with Pembina, the revenue and dividends of the Company and the operations of the Midstream business could
be negatively impacted.See "General Risk Factors – Credit Risk."



Risk Factors Relating to the Securities
of Pembina



Dilution of Shareholders



Pembina is authorized to issue, among other
classes of shares, an unlimited number of Common Shares for consideration and on terms and conditions as established by the Board
of Directors without the approval of Shareholders in certain instances. The Shareholders will have no pre-emptive rights in connection
with such further issuances. Any issuance of Common Shares may have a dilutive effect on existing shareholders.



Risk Factors Relating to the Activities
of Pembina and the Ownership of Securities



The following is a list of certain risk factors
relating to the activities of Pembina and the ownership of its securities:



| | · | the level of Pembina's indebtedness from time to time could impair Pembina's ability to obtain
additional financing on a timely basis to take advantage of business opportunities that may arise;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the uncertainty of future dividend payments by Pembina and the level thereof, as Pembina's dividend
policy and the funds available for the payment of dividends from time to time will be dependent upon, among other things, operating
cash flow generated by Pembina and its subsidiaries, financial requirements for Pembina's operations, the execution of its growth
strategy and the satisfaction of solvency tests imposed by the ABCA for the declaration and payment of dividends;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Pembina may make future acquisitions or may enter into financings or other transactions involving
the issuance of securities of Pembina which may be dilutive;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the inability of Pembina to manage growth effectively, and realize the anticipated growth opportunities
from acquisitions and new projects, could have a material adverse impact on its business, operations and prospects; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | · | the risk that the market value of the Common Shares may deteriorate materially if Pembina is unable
to meet its cash dividend targets or make cash dividends in the future.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Market Value of Common Shares and Other
Securities



Pembina cannot predict at what price the Common
Shares, Series F Convertible Debentures, Class A Preferred Shares or other securities issued by Pembina will trade in the future.
Common Shares, Series F Convertible Debentures, Class A Preferred Shares and other securities of Pembina will not necessarily trade
at values determined solely by reference to the underlying value of Pembina's assets. One of the factors that may influence the
market price of such securities is the annual yield on the Common Shares, Class A Preferred Shares and the Series F Convertible
Debentures. An increase in market interest rates may lead purchasers of Common Shares, Class A Preferred Shares or Series F Convertible
Debentures to demand a higher annual yield and this could adversely affect the market price of the Common Shares, Class A Preferred
Shares or Series F Convertible Debentures. In addition, the market price for the Common Shares, Class A Preferred Shares and the
Series F Convertible Debentures may be affected by announcements of new developments, changes in Pembina's operating results, failure
to meet analysts' expectations, changes in credit ratings, changes in general market conditions, fluctuations in the market for
equity or debt securities and numerous other factors beyond the control of Pembina.



Shareholders are encouraged to obtain independent
legal, tax and investment advice in their jurisdiction of residence with respect to the holding of Common Shares, Class A Preferred
Shares or Series F Convertible Debentures.



General Risk Factors



Additional Financing and Capital Resources



The timing and amount of Pembina's capital
expenditures, and the ability of the Company to repay or refinance existing debt as it becomes due, directly affects the amount
of cash dividends that Pembina pays. Future acquisitions, expansions of Pembina's assets, and other capital expenditures and the
repayment or refinancing of existing debt as it becomes due will be financed from sources such as cash generated from operations,
the issuance of additional shares or other securities (including debt securities) of Pembina, and borrowings. Dividends may be
reduced, or even eliminated, at times when significant capital or other expenditures are made. There can be no assurance that sufficient
capital will be available on terms acceptable to Pembina, or at all, to make additional investments, fund future expansions or
make other required capital expenditures. As a result of the ongoing weakness in the global economy, and in particular the commodity-related
industry sectors, Pembina may experience restricted access to capital and increased borrowing costs. Although Pembina's business
and asset base have not changed materially, the ability of Pembina to raise capital is dependent upon, among other factors, the
overall state of capital markets and investor demand for investments in the energy industry and Pembina's securities in particular.
To the extent that external sources of capital, including the issuance of additional shares or other securities or the availability
of additional credit facilities, become limited or unavailable on favourable terms or at all due to credit market conditions or
otherwise, the ability of Pembina to make the necessary capital investments to maintain or expand its operations, to repay outstanding
debt and to invest in assets, as the case may be, may be impaired. To the extent Pembina is required to use cash flow to finance
capital expenditures or acquisitions or to repay existing debt as it becomes due, the level of dividends payable may be reduced.



Counterparty Credit Risk



Counterparty credit risk represents the financial
loss Pembina would experience if a counterparty to a financial instrument or commercial agreement failed to meet its contractual
obligations in accordance with the terms and conditions of said agreements with Pembina. Counterparty credit risk arises primarily
from Pembina's cash and cash equivalents, trade and other receivables, and from counterparties to its derivative financial instruments.



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Pembina continues to closely monitor and reassess
the creditworthiness of its counterparties, including financial institutions. This may result in Pembina reducing or mitigating
its exposure to certain counterparties where it is deemed warranted and permitted under contractual terms. Pembina manages counterparty
credit risk through established credit management techniques, including conducting comprehensive financial and other assessments
for all new counterparties and regular reviews of existing counterparties to establish and monitor counterparties' creditworthiness,
setting exposure limits, monitoring exposures against these limits and seeking and obtaining financial assurances where warranted
and permitted under contractual terms. Pembina utilizes various sources of financial, credit and business information in assessing
the creditworthiness of a counterparty including external credit ratings, where available, and in other cases, detailed financial
statement analysis in order to generate an internal credit rating based on quantitative and qualitative factors. The establishment
of counterparty exposure limits is governed by a Board-designated counterparty exposure limit matrix which represents the maximum
dollar amounts of counterparty exposure by debt rating that can be approved for a counterparty. Pembina continues to closely monitor
and reassess the creditworthiness of its counterparties, which has resulted in Pembina reducing or mitigating its exposure to certain
counterparties where it was deemed warranted and permitted under contractual terms.



Financial assurances may include guarantees,
letters of credit and cash. As at December 31, 2016, letters of credit totaling $115 million (December 31, 2015: $68 million) were
held primarily in respect of customer trade receivables.



Typically, Pembina has collected its receivables
in full and at December 31, 2016, approximately 95 percent were current. Pembina has a general lien and a continuing and first
priority security interest in, and a secured charge on, all of a shipper's petroleum in its custody. The risk of non-collection
is considered to be low and no material impairment of trade and other receivables has been made.



Pembina monitors and manages its concentration
of counterparty credit risk on an ongoing basis. Pembina also evaluates counterparty risk from the perspective of future exposure
that is created through commercial agreements with existing or new counterparties that support future capital expansion projects.
Pembina believes these measures are prudent and allow for effective management of its counterparty credit risk but there is no
certainty that they will protect it against all material losses. As part of its ongoing operations, Pembina must balance its market
and counterparty credit risks when making business decisions.



Debt Service



At the end of 2016, Pembina had exposure to
floating interest rates on $353 million in debt. Floating rate debt exposure is, in part, managed by using derivative financial
instruments.



Variations in interest rates and scheduled
principal repayments, if required under the terms of Pembina's banking agreements could result in significant changes in the amounts
required to be applied to debt service before payment of any dividends. Certain covenants in the Company's agreements with its
lenders may also limit payments and dividends paid by Pembina.



Pembina and its subsidiaries are permitted
to borrow funds to finance the purchase of pipelines and other energy infrastructure assets, to fund capital expenditures and other
financial obligations or expenditures in respect of those assets and for working capital purposes. Amounts paid in respect of interest
and principal on debt incurred in respect of those assets reduce the amount of cash flow available for Common Share dividends.
Variations in interest rates and scheduled principal repayments for which Pembina may not be able to refinance at favourable rates
or at all, could result in significant changes in the amount required to be applied to service debt, which could have detrimental
effects on the amount of cash available for Common Share dividends. Pembina, on a consolidated basis, is also required to meet
certain financial covenants under the Credit Facilities and is subject to customary restrictions on its operations and activities,
including restrictions on the granting of security, incurring indebtedness and the sale of its assets.



- 68 -







The lenders under Pembina's unsecured credit
facilities have also been provided with guarantees and subordination agreements. If Pembina becomes unable to pay its debt service
charges or otherwise commits an event of default such as bankruptcy, payments to all of the lenders will rank in priority to dividends
and payments to holders of Series F Convertible Debentures.



Although Pembina believes the existing Credit
Facilities are sufficient for immediate requirements, there can be no assurance that the amount will be adequate for the future
financial obligations of Pembina or that additional funds will be able to be obtained on terms favourable to Pembina or at all.



Credit Ratings



Rating agencies regularly evaluate Pembina,
basing their ratings of its long-term and short-term debt on a number of factors. This includes Pembina's financial strength as
well as factors not entirely within its control, including conditions affecting the industry in which Pembina operates generally
and the wider state of the economy. There can be no assurance that one or more of Pembina's credit ratings will not be downgraded.



Pembina's borrowing costs and ability to raise
funds are directly impacted by its credit ratings. Credit ratings may be important to suppliers or counterparties when they seek
to engage in certain transactions. A credit rating downgrade could potentially impair Pembina's ability to enter into arrangements
with suppliers or counterparties, to engage in certain transactions, and could limit Pembina's access to private and public credit
markets and increase the costs of borrowing under its existing credit facilities. A downgrade could also limit Pembina's access
to debt and preferred share markets and increase its cost of borrowing.



The occurrence of a downgrade in Pembina's
credit ratings could adversely affect its ability to execute portions of its business strategy and could have a material adverse
effect on its liquidity, results of operations and capital position.



Reliance on Management and Labour



Shareholders and other security holders of
Pembina will be dependent on senior management and directors of the Company in respect of the governance, administration and management
of all matters relating to Pembina and its operations and administration. The loss of the services of key individuals could have
a detrimental effect on Pembina. Further, the costs associated with retaining key individuals could adversely affect Pembina's
business opportunities and financial results. There is no assurance that Pembina will continue to attract and retain all personnel
necessary for the development and operation of its business.



Aboriginal Land Claims and Consultation
Obligations



Aboriginal peoples have claimed title and
rights to a substantial portion of the lands in western Canada. Such claims, if successful, could have a significant adverse effect
on Pembina's Canadian operations. Further, the successful assertion of Aboriginal title or other claims could have a significant
adverse effect on natural gas production or oil sands development in Alberta, which in turn could have a material adverse effect
on Pembina's business and operations, including the volume of natural gas and NGL handled through Pembina's facilities.



Additionally, the federal and provincial governments
in Canada have a duty to consult and, where appropriate, accommodate Aboriginal people where the interests of the Aboriginal peoples
may be affected by a Crown action or decision. Accordingly, the Crown's duty may result in regulatory approvals being delayed
or not being obtained in relation to Pembina's Canadian operations.



In mid-2016, the Government of Canada issued
changes to the Canadian Environmental Assessment Agency ("CEAA") Technical Guidance for Assessing the Current
Use of Lands for Traditional Purposes. This technical guidance document is used on projects with a CEAA 2012 trigger, including
resource projects currently under review by the NEB. The impact on existing third-party projects has been to add up to six months
of time added to the project review process. These changes could materially impact the amount of time and capital resources required
by Pembina if we were to apply for longer NEB regulated pipelines projects or projects with a CEAA 2012 trigger.



- 69 -







Potential Conflicts of Interest



Shareholders and other security holders of
Pembina are dependent upon senior management and the directors of Pembina for the governance, administration and management of
the Company. Certain directors and officers of Pembina may be directors or officers of entities in competition to Pembina and,
as such, these directors or officers of Pembina may encounter conflicts of interest in the administration of their duties with
respect to Pembina.



Litigation



Pembina and its various subsidiaries and affiliates
are, in the course of their business, subject to lawsuits and other claims. Defence and settlement costs associated with such lawsuits
and claims can be substantial, even with respect to lawsuits and claims that have no merit. Due to the inherent uncertainty of
the litigation process, the resolution of any particular legal proceeding could have a material adverse effect on the financial
position or operating results of Pembina.



Foreign Exchange Risk



Pembina's commodity-related transactions, rail
car leases, Vantage pipeline tariff cash flows and some of its capital expenditure commitments may be subject to currency risk,
primarily arising from the denomination of specific earnings, cash flows and expenditure commitments in U.S. dollars. Pembina partially
mitigates this risk using an active Risk Management Program to exchange foreign currency for domestic currency at a fixed rate.



Interest Rate Risk



Pembina has floating interest rate debt which
subjects the Company to interest rate risk. Pembina responds to this risk under the active Risk Management Program by entering
into financial derivative contracts to fix interest rates.



Cyber Security



Pembina's infrastructure, technologies and
data are becoming increasingly integrated, which creates a risk that failure of one system could lead to failure of another system.
The risk of a cyber-attack targeting the industry is also increasing. A breach in the security or failure of the Company's
information technology could result in operational outages, delays, damage to assets or the environment, reputational harm, lost
profits, lost data and other adverse outcomes. The Company's security strategy focuses on information technology security
risk management which includes continuous monitoring, threat detection and an incident response protocol.



Health and Safety



The operation of Pembina's business is subject
to hazards of gathering, processing, transporting, fractionating, storing and marketing hydrocarbon products, including but not
limited to: blowouts; fires; explosions; gaseous leaks; migration of harmful substances; oil spills; corrosion; and acts of vandalism
and terrorism. Any of these hazards can interrupt operations, impact Pembina's reputation, cause loss of life or personal injury,
result in loss of or damage to equipment, property, information technology systems, related data and control systems, and cause
environmental damage that may include polluting water, land or air.



- 70 -







INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL
TRANSACTIONS



To the knowledge of the directors and executive
officers of Pembina, none of the directors or executive officers of Pembina, and no person or company that is the direct or indirect
beneficial owner of, or who exercises control or direction over, more than 10 percent of the Common Shares, and no associate or
affiliate of any of the foregoing, has had any material interest, direct or indirect, in any transaction with Pembina since January
1, 2014 that has materially affected Pembina, or in any proposed transaction that would materially affect Pembina.



MATERIAL CONTRACTS



No contracts material to Pembina and its subsidiaries
were entered into during 2016 or 2017 to date or are currently in effect, other than contracts entered into in the ordinary course
of business.



LEGAL PROCEEDINGS AND REGULATORY ACTIONS



There are no outstanding legal proceedings,
or regulatory actions, penalties or sanctions material to Pembina to which Pembina or any of its direct or indirect subsidiaries
is a party or in respect of which any of the properties of Pembina or any of its direct or indirect subsidiaries are subject, nor
are there any such proceedings, actions, penalties or sanctions known to be contemplated.



REGISTRAR AND TRANSFER AGENT



The registrar and transfer agent for the Common
Shares, the Series F Convertible Debentures, the Medium Term Notes and the Class A Preferred Shares is Computershare Trust Company
of Canada, at its principal offices in Calgary, Alberta, Canada and Toronto, Ontario, Canada. The co-transfer agent and registrar
for the Common Shares in the U.S. is Computershare Investor Services U.S., at its principal offices in Golden, Colorado, U.S.



INTERESTS OF EXPERTS



KPMG LLP are the auditors of the Company and
have confirmed that they are independent with respect to the Company within the meaning of the relevant rules and related interpretations
prescribed by the relevant professional bodies in Canada and any applicable legislation or regulations and also that they are independent
accountants with respect to the Company under all relevant U.S. professional and regulatory standards.



ADDITIONAL INFORMATION



Additional information relating to Pembina
filed with the Canadian securities commissions and the SEC can be found on Pembina's profile on the SEDAR website at www.sedar.com,
the EDGAR website at www.sec.gov, and on Pembina's website at www.pembina.com. Additional information, including directors' and
officers' remuneration and indebtedness, principal holders of Pembina's securities and securities authorized for issuance under
equity compensation plans, as applicable, is contained in Pembina's information circular for its most recent annual meeting of
security holders that involved the election of directors. Additional financial information relating to Pembina is provided in Pembina's
Financial Statements and MD&A for its most recently completed financial year, which have also been filed on SEDAR and EDGAR.



Any document referred to in this Annual Information
Form and described as being filed on SEDAR at www.sedar.com and on EDGAR at www.sec.gov (including those documents referred to
as being incorporated by reference in this Annual Information Form) may be obtained free of charge from us by contacting our Investor
Relations Department by telephone (toll free 1-855-880-7404) or by email (investor-relations@pembina.com).



- 71 -







APPENDIX "A" – AUDIT COMMITTEE
CHARTER



| | I. | ROLE
                                         AND OBJECTIVES
| | -- | ------------------------------------------------------------





The Audit Committee is a committee of the Board of Directors (the
"Board") of Pembina Pipeline Corporation (the "Corporation") to which the Board has delegated certain oversight
responsibilities relating to the Corporation's financial statements, the external auditors, the internal audit function,
risk management, compliance with legal and regulatory requirements and management information technology. In this Charter, the
Corporation and all entities controlled by the Corporation are collectively referred to as "Pembina."







The objectives of the Audit Committee are to
maintain oversight of:



| | (a) | the integrity of Pembina's financial statements, the reporting process and internal controls
over financial reporting;
| | --- | ----------------------------------------------------------------------------------------------------------------------



| | (b) | the relationship, reports, qualifications, independence
and performance of the external auditor;
| | --- | ------------------------------------------------------------------------------------------------



| | (c) | the internal audit function;
| | --- | ----------------------------



| | (d) | the risk identification, assessment and management program;
| | --- | -----------------------------------------------------------



| | (e) | compliance with legal and regulatory requirements;
| | --- | --------------------------------------------------



| | (f) | management of information technology related to financial reporting and financial controls;
                                                                             and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (g) | maintenance of open avenues of communication among management of the Corporation, the external
auditors, the internal auditors and the Board.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------



| | II. | MEMBERSHIP
                                         AND POLICIES
| | --- | ----------------------------------------------------------------





The Board, based on recommendation from the
Governance Committee, will appoint or reappoint members of the Audit Committee. Each member shall serve until his or her successor
is appointed unless the member resigns, is removed ceases to be a director. The Board of Directors may fill a vacancy that occurs
in the Committee at any time.



The Audit Committee must be composed of not less than three (3) members of the Board,
each of whom must be independent pursuant to the Corporation's Standards for Director Independence and financially literate as determined by the Board using its
business judgment. In addition, at least one member must be an “audit committee financial expert” within the meaning
of that term under the United States Securities Exchange Act of 1934, as amended, and the rules adopted by the United States Securities
and Exchange Commission thereunder. The Board Chair, in consultation with the Governance Committee, will appoint or reappoint
the Chair of the Audit Committee from amongst its members.





The Audit Committee may at any time retain
outside financial, legal or other advisors as it determines necessary to carry out its duties, at the expense of Pembina. Pembina
shall provide for appropriate funding, as determined by the Audit Committee in its capacity as a committee of the Board, for payment
of: (i) compensation to the external auditor for the purpose of preparing or issuing an audit report or performing other audit,
review or attestation services for Pembina, (ii) compensation to any advisors employed by the Audit Committee, and (iii) ordinary
administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.



– A-1 –







In discharging its duties under this Charter,
the Audit Committee may investigate any matter brought to its attention and will have access to all books, records, facilities
and personnel, may conduct meetings or interview any officer or employee, the Corporation's legal counsel, external auditors and
consultants, and may invite any such persons to attend any part of any meeting of the Audit Committee.



The Audit Committee has neither the duty nor
the responsibility to conduct audit, accounting or legal reviews, or to ensure that the Corporation's financial statements are
complete, accurate and in accordance with International Financial Reporting Standards ("IFRS") as issued by the International
Accounting Standards Board ("IASB"); rather, management is responsible for the financial reporting process, internal
review process, and the preparation of the Corporation's financial statements in accordance with IFRS, and the Corporation's external
auditor is responsible for auditing those financial statements.



| | III. | FUNCTIONS
| | ---- | ---------



| | A. | Pembina's Financial Statements, the Reporting Process and Internal Controls over Financial
Reporting
| | -- | ----------------------------------------------------------------------------------------------------



The Audit Committee will meet with management,
the internal auditor and the external auditor to review and discuss annual and quarterly financial statements, management's discussion
and analyses ("MD&A"), the earnings press releases, and other financial disclosures and determine whether to recommend
the approval of such documents to the Board.



| | a) | In connection with these procedures, the Audit Committee will, as applicable and without limitation,
review and discuss with management, internal audit and the external auditor:
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | i. | the
                                         information to be in the financial statements and financial disclosures which require
                                         approval by the Board including Pembina's annual and quarterly financial statements,
                                         notes thereto, MD&A and earnings press releases paying particular attention to any
                                         use of “pro forma”, “adjusted” and “non-GAAP” information,
                                         and ensuring that adequate procedures are in place for the review of the Corporation's
                                         public disclosure of financial information extracted or derived from the financial statements;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | any significant financial reporting issues identified during the reporting period;
| | --- | ----------------------------------------------------------------------------------



| | iii. | any change in accounting policies, or selection or application of accounting principles, and their impact on the results and
the disclosure;
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------



| | iv. | all significant estimates and judgments, significant risks and uncertainties made in connection
with the preparation of Pembina's financial statements that may have a material impact to the financial statements;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | v. | any significant deficiencies or material weaknesses identified by management, internal
                                                              auditors or the external                                                               auditor, compensating or mitigating
                                                              controls and final assessment and impact on disclosure;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | vi. | any major issues as to the adequacy of the internal controls
and any special audit steps adopted in light of material control deficiencies;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------



| | vii. | significant adjustments identified by management, internal auditor, or the external auditor
                                                                and assessment of associated internal control deficiencies, as applicable;
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | viii. | any unresolved issues between management and the external auditor that could materially impact
the financial statements and other financial disclosures;
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | ix. | any material correspondence with regulators, government agencies, any employee or whistleblower
complaints, reports of non-compliance which raise issues regarding the Corporation's financial statements or accounting policies
and significant changes in regulations which may have a material impact on the Corporation's financial statements;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



– A-2 –







| | x. | the effect of regulatory and accounting initiatives, as well as any off-balance sheet
                                                              structures;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | xi. | the competencies and performance of employees in the Corporation's internal audit
department and identify staffing needs;
| | --- | -------------------------------------------------------------------------------------------------------------------------



| | xii. | significant matters of concern respecting audits and
                                                                financial reporting processes, including any illegal acts, that have been identified in the course of the preparation or
                                                                audit of Pembina's financial statements;and
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | xiii. | any analyses prepared by management and/or the external
auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of financial
statements including analyses of the effects of IFRS on the financial statements.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | In connection with the annual audit of Pembina's financial statements, the Audit Committee will
review with the external auditor:
| | -- | ---------------------------------------------------------------------------------------------------------------------------------



| | i. | prior to commencement of the annual audit, plans, scope, staffing, engagement terms and proposed
fees;
| | -- | ------------------------------------------------------------------------------------------------------



| | ii. | reports or opinions to be rendered in connection therewith including the external auditor's review
or audit findings report including alternative treatments of significant financial information within IFRS that have been discussed
with management and associated impacts on disclosure; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | the adequacy of internal controls, any audit problems or difficulties, including:
| | ---- | ---------------------------------------------------------------------------------



| | a) | any restrictions on the scope of the external auditor's activities or on access to requested information;
| | -- | ---------------------------------------------------------------------------------------------------------



| | b) | any significant disagreements with management, and management's response (including discussion
among management, the external auditor and, as necessary, internal and external legal counsel);
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) | any litigation, claim or contingency, including tax assessments and claims, that could have a material
impact on the financial position of the Corporation; and
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d) | the impact on current or potential future disclosures.
| | -- | ------------------------------------------------------





In connection with its review of the
annual audited financial statements and quarterly financial statements, the Audit Committee will also review any significant concerns
raised during the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) certifications with
respect to the financial statements and Pembina's disclosure controls and internal controls. In particular,
the Audit Committee will review with the CEO, CFO, internal auditor and external auditor: (i) all significant deficiencies, material
weaknesses or significant changes in the design or operation of Pembina's internal control over financial reporting that could
adversely affect Pembina's ability to record, process, summarize and report financial information required to be disclosed by the
Corporation in the reports that it files or submits under applicable securities laws, within the required time periods; and (ii)
any fraud, whether or not material, that involves management of Pembina or other employees who have a significant role in Pembina's
internal control over financial reporting. In addition, the Audit Committee will review with the CEO, CFO and the internal auditor
Pembina's disclosure controls and procedures and at least annually will review management's conclusions about the efficacy of disclosure
controls and procedures, including any significant deficiencies, material weaknesses or material non-compliance with disclosure
controls and procedures.





– A-3 –







The Audit Committee will also maintain a Whistleblower
Policy, including procedures for the:



| | (a) | receipt retention and treatment of complaints received regarding accounting, internal accounting
controls or auditing matters; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------



| | (b) | confidential, anonymous submissions of concerns regarding questionable accounting or
auditing matters.
| | --- | ------------------------------------------------------------------------------------------------------



| | B. | The External Auditor
| | -- | --------------------



The Audit Committee, in its capacity as a committee
of the Board, is directly responsible for overseeing the relationship, reports, qualifications, independence and performance of
the external auditor and audit services by other registered public accounting firms engaged by the Corporation. The Audit Committee shall have the authority and responsibility to recommend the appointment and the revocation of the appointment
of the external auditors engaged for the purpose of preparing or issuing an audit report or performing other audit, review
or attest services, and to fix their remuneration.



The external auditor will report directly
to the Audit Committee. The Audit Committee's appointment of the external auditor is subject to annual approval by the
Shareholders.



With respect to the external auditor, the Audit
Committee is responsible for:



| | (a) | the appointment, termination, compensation, retention and oversight of the work of the external
auditor engaged by the Corporation including the review and approval of the terms of the external auditors annual engagement letter
and the proposed fees;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | resolution of disagreements or disputes between management and the external auditor regarding financial
reporting for audit, review or attestation services;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | pre-approval of all legally permissible
non-audit services to be provided by the external auditors considering the potential impact of such services on the independence
of external auditors and, subject to any de minimisexemption
available under applicable laws. Such approval can be given either specifically or pursuant to preapproval policies and procedures
adopted by the committee including the delegation of this ability to one or more members of the Audit Committee to the extent permitted
by applicable law, provided that any pre-approvals granted pursuant to any such delegation may not delegate Audit Committee responsibilities
to management of Pembina, and must be reported to the full Audit Committee at the first scheduled meeting of the Audit Committee
following such pre-approval;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | obtaining and reviewing, at least annually, a written report by the external auditor describing
the external auditor's internal quality-control procedures, any material issues raised by the most recent internal quality-control
review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such
issues and all relationships between the external auditors and the Corporation;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | review of the external auditor which assesses three key factors of audit quality for the audit
committee to consider and assess including: independence, objectivity and professional skepticism; quality of the engagement team;
and quality of communications and interactions with the external auditor. A written comprehensive review of the external auditor
to be considered if required each year and completed at least every five (5) years which will include an:
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



– A-4 –







| | i. | assessment of quality of services and sufficiency of resources provided by the external auditor;
| | -- | ------------------------------------------------------------------------------------------------



| | ii. | assessment of auditor independence, objectivity and professional skepticism;
| | --- | ----------------------------------------------------------------------------



| | iii. | assessment of value of services provided by the external auditor;
| | ---- | -----------------------------------------------------------------



| | iv. | assessment of written input from external auditor summarizing:
| | --- | --------------------------------------------------------------



| | a) | background of firm, size, resources, geographical coverage, relevant industry experience, including
reputational challenges, systemic audit quality issues identified by Canadian Public Accountability Board ("CPAB") and
Public Company Accounting Oversight Board ("PCAOB") in public reports;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | industry experience of the audit team and plans for training and development of the team;
| | -- | -----------------------------------------------------------------------------------------



| | c) | how the external auditor demonstrated objectivity and professional skepticism during the audit;
| | -- | -----------------------------------------------------------------------------------------------



| | d) | how the firm and team met all criteria for independence including identification of all relationships
that the external auditor has with the Corporation and its affiliates and steps taken to address possible institutional threats;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e) | involvement of engagement quality control review ("EQCR") partner and significant concerns
raised by the EQCR partner;
| | -- | ----------------------------------------------------------------------------------------------------------------------



| | f) | matters raised to national office or specialists during the review;
| | -- | -------------------------------------------------------------------



| | g) | significant disagreements between management and the external auditors and steps taken to resolve;
| | -- | --------------------------------------------------------------------------------------------------



| | h) | satisfaction with communication and cooperation with management and the Audit Committee; and
| | -- | --------------------------------------------------------------------------------------------



| | i) | findings and firm responses to reviews of the Corporation by CPAB and PCAOB;
| | -- | ----------------------------------------------------------------------------



| | v. | communication of the results of the comprehensive review of the external auditor to the Board
                                                               and recommending that the Board take appropriate action, in response to the review, as required. It is understood that the
                                                               Audit Committee may recommend tendering the external auditor engagement at their discretion. In addition to rotation of the
                                                               EQCR partner as required by law, the Audit Committee, together with the Board, will also consider whether it is necessary to
                                                               periodically rotate the external audit firm itself. It will be at the discretion of the Audit Committee if the incumbent
                                                               external auditor is invited to participate in the tendering process; and
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | vi. | setting clear hiring policies
for Pembina regarding external auditor partners and employees and former partners and employees of the present and former external
auditor of the Corporation. Before any external auditor partner, senior manager or manager is offered employment by the Corporation,
prior approval from the Audit Committee Chair must be received and a one year grace period must pass from the date any work was
completed on a Pembina engagement before an external auditor employee can be considered for contract or employment by the Corporation.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | C. | The Internal Audit Process
| | -- | --------------------------



The Audit Committee, in its capacity as a committee
of the Board will carry out the following responsibilities with regard to the internal audit function:



– A-5 –







| | (a) | review with management and the head of internal audit the charter, activities, staffing, and organizational
structure of internal audit, including the performance of the internal audit function;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | have final authority to review and approve the annual audit plan and all major changes to the plan;
| | --- | ---------------------------------------------------------------------------------------------------



| | (c) | annually convey its view of the performance of the head
of internal audit to the Chief Executive Officer as input into the compensation approval process; (d)	ensure there are no unjustified
restrictions or limitations, and review and concur in the appointment, replacement, or dismissal of the head of internal audit;
and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | on a regular basis, meet separately with the head of internal audit to discuss any matters that
the Audit Committee or the head of internal audit believes should be discussed privately.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | D. | Risk Management
| | -- | ---------------





The Audit Committee, in its capacity as a
committee of the Board, is directly responsible for overseeing the risk identification, assessment and management program of the
Corporation by discussing guidelines and policies to govern the process by which risk identification, assessment and management
is undertaken. At least annually, in conjunction with senior management, internal counsel and, as necessary, external counsel
and the Corporation's internal and external auditors, the Audit Committee will review the following:





| | (a) | the Corporation's method of reviewing significant risks
inherent in the Corporation's business, assets, facilities, and strategic directions, including the Corporation's risk management
and evaluation process;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | discuss guidelines and policies with respect to risk assessment
and risk management, including the Corporation's major financial risk exposures and the steps management has taken to monitor
and control such exposures. The audit committee is not required to be the sole body responsible for risk assessment and management,
but, as stated above, the committee must discuss guidelines and policies to govern the process by which risk assessment and management
is undertaken.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | the Annual Corporate Enterprise Management Risk Assessment
and updates thereto and report to the Board thereon;
| | --- | ---------------------------------------------------------------------------------------------------------------



| | (d) | the major financial risk exposures and steps management
has taken to monitor and manage such exposures;
| | --- | -------------------------------------------------------------------------------------------------------



| | (e) | the Corporation's annual insurance report including
the risk retention philosophy and resulting uninsured exposure, if any, including corporate liability protection programs for
directors and officers;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (f) | the loss prevention policies, risk management programs,
disaster response and recovery programs, and standards and accountabilities of the Corporation in the context of competitive and
operational considerations; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (g) | other risk management matters from time to time as the
Audit Committee may consider appropriate or the Board may specifically direct.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------



– A-6 –







| | E. | Additional
                                         Duties and Responsibilities
| | -- | -------------------------------------------------------------------------------



The
Audit Committee will also:



| | (h) | meet
                                         separately with management, the internal auditor, the external auditor and, as is appropriate,
                                         internal and external legal counsel and independent advisors in respect of issues not
                                         elsewhere listed concerning any other audit, finance or risk matters;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (i) | review the appointment of the CFO and any other key financial executives who are involved in the
financial reporting process;
| | --- | -----------------------------------------------------------------------------------------------------------------------------



| | (j) | review the Corporation's information technology practices and developments as they relate
to financial reporting;
| | --- | -----------------------------------------------------------------------------------------------------------------



| | (k) | from time to time discuss the staffing levels and competencies of the finance team with the External
Auditor
| | --- | ------------------------------------------------------------------------------------------------------------





| | (l) | review incidents, alleged or otherwise, as reported by whistleblowers, management, internal
                                                                 audit, the external auditor, internal or external counsel or otherwise, of fraud, illegal acts or conflicts of interest and
                                                                 establish procedures for receipt, treatment and retention of records of incident investigations;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (m) | facilitate information sharing with other committees of the Board as required to address matters
of mutual interest or concern in respect of the Corporation's financial reporting;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (n) | assist board oversight  in respect of issues not elsewhere listed concerning the integrity of
                                                           the listed company's financial statements, the listed company's compliance with legal and regulatory requirements, the
                                                           independent auditor's qualifications and independence, and the performance of the listed company's internal audit function
                                                           and independent auditors;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (o) | monitor the funding exposure of the Corporation's pension plan;
| | --- | ---------------------------------------------------------------



| | (p) | receive and review reports from the Corporate Pension Committee at Pembina and recommend or approve
changes as appropriate with respect to risk management of pension assets and liabilities, actuarial valuation as required by statute,
the Statement of Investment Policies and Procedures, funding policy and corporate performance for the pension plans;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (q) | jointly with the Human Resources and Compensation Committee, report on the status of the pension
plans to the Board at least annually; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------



| | (r) | have the authority and responsibility to recommend the
appointment and the revocation of the appointment of registered public accounting firms (in addition to the external auditors)
engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services, and to fix
their remuneration.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, the Audit Committee will perform
such other functions as are assigned by law and the Corporation's by-laws, and on the instructions of the Board.



| | IV. | MEETINGS
| | --- | --------



The Audit Committee will meet quarterly, or
more frequently at the discretion of the members of the Audit Committee, as circumstances require.



– A-7 –







Additionally, the external auditor may call
a meeting of the Audit Committee provided the external auditor abides by the notice requirements set forth below.



Notice of each meeting of the Audit Committee
will be given to each member and to the internal and external auditors, who are entitled to attend each meeting of the Audit Committee.
The notice will:



| | (a) | be in writing (which may be communicated by fax or email);
| | --- | ----------------------------------------------------------



| | (b) | be accompanied by an agenda that states the nature of the business to be transacted at the meeting
in reasonable detail;
| | --- | ------------------------------------------------------------------------------------------------------------------------



| | (c) | include copies of documentation to be considered at the meeting and reasonably sufficient time to review documentation; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------



| | (d) | be given at least 48 hours preceding the time stipulated for the meeting, unless notice is waived
by the Audit Committee members.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------



A quorum for a meeting of the Audit Committee
is a majority of the members present in person, by video conference, webcast or telephone.



If the Chair is not present at a meeting of
the Audit Committee, a Chair will be selected from among the members present. The Chair will not have a second or deciding vote
in the event of an equality of votes.



At each meeting, the Audit Committee will meet
"in-camera", without management or internal or external auditors present, and will meet in separate sessions with each
of the head of internal audit and the lead partner of the external auditor at least annually.



The Audit Committee may invite others to attend
any part of any meeting of the Audit Committee as it deems appropriate. This includes other directors, members of management, any
employee, the Corporation's internal or external legal counsel, external auditors, advisors and consultants.



Minutes will be kept of all meetings of the
Audit Committee. The minutes will include copies of all resolutions passed at each meeting, will be maintained with the Corporation's
records, and will be available for review by members of the Audit Committee, the Board, and the external auditor.



| | V. | OTHER
                                         MATTERS
| | -- | ------------------------------------------------------



| | A. | Review of Charter
| | -- | -----------------



The Audit Committee shall review and reassess
the adequacy of this Charter at least annually or otherwise, as it deems appropriate, and propose recommended changes to the Governance
Committee.



| | B. | Reporting
| | -- | ---------





The Audit Committee shall report to the Board
activities and recommendations of each Audit Committee meeting and review with the full board any issues that arise with respect
to the quality or integrity of the listed Corporation's financial statements, the Corporation's compliance with legal
or regulatory requirements, the performance and independence of the Corporation's external auditors, the performance of the
internal audit function, management information technology with respect to financial reporting matters, risk management and communication
between the parties identified above.





– A-8 –







| | C. | Evaluation
| | -- | ----------



The Audit Committee's performance shall be
evaluated annually by the Governance Committee and the Board as part of the Board assessment process established by the Governance
Committee and the Board.



– A-9 –