Pipeline delays add appeal to creative options for Canada’s oil transport, transformation

Trans Mountain expansion and Keystone XL pipeline projects in court limbo trigger new ideas to get oil to market

News that permitting issues in the U.S. would delay Enbridge Inc.’s Line 3 replacement pipeline project until the middle of 2020 instead of late this year means that yet another boost in oil export capacity has been kicked down the road.

With both the Trans Mountain expansion and Keystone XL pipeline projects in court limbo, attention is turning to alternative ideas to expand Canada’s ability to continue to get its oil to market.

In a report to Natural Resources Minister Amarjeet Sohi last month, the National Energy Board said current pipeline capacity is fully utilized and crude-by-rail infrastructure is operating at or near capacity.

But it also identified potential long-term market access solutions that could include more oilsands bitumen upgrading and reversing existing import pipelines.

Unfortunately, none of those ideas works as a meaningful short-term alternative to new pipelines — and they face many of the same speed bumps — says NEB chief economist Jean-Denis Charlebois.

READ MORE: Canada says B.C. trying to impede Trans Mountain with pipeline legislation

READ MORE: B.C. says it won’t reject pipelines without cause

“Fundamentally, what this would require is regulatory approvals and significant capital investments because those things cannot occur overnight,” he said in an interview.

“First the economics have to be there … then those alternatives need to go through a regulatory process.”

A dearth of investment dollars for traditional drilling in Western Canada means there are also fewer dollars available for developing creative options, said Kevin Birn, a vice-president with IHS Energy in Calgary.

“I think you will have some creativity but if you really want creativity, they’ve got to see a future for investment in Western Canada,” he said.

Here’s a closer look at some pipeline alternative solutions.

The diluent dilemma

Raw bitumen at room temperature has the consistency of peanut butter. Below freezing, it’s as hard as a hockey puck.

To make it flow in a pipeline, producers mix as many as three barrels of light oil “diluent” for every seven barrels of bitumen — if one can eliminate or reduce the diluent, it frees up room in the pipeline.

In January, the Alberta government announced a $440-million loan guarantee to help Value Creation Inc. build a $2-billion upgrader that would convert diluted bitumen into medium synthetic crude and diesel, both capable of flowing undiluted in a pipeline.

The facility is the first in line for up to $1 billion in provincial incentives for partial upgraders, but it isn’t expected to be operating until at least 2022.

A report prepared for the province in 2017 suggested that a 100,000-barrel-per-day partial upgrading facility could add $10 to $15 of value to each barrel of bitumen. The report listed 10 pre-commercial technologies that have been tested or proposed for deployment in Alberta.

Any plan to reduce diluent must consider the impact on U.S. customers, who have configured their refineries to use diluted bitumen, said Birn.

He added diluent will still be needed to deliver the bitumen from the field to the partial upgrader, which means diluent recovery units likely also will need to be built.

New technology

No diluent at all would be required with a new technology to mix and coat bitumen with recycled plastic and form it into solid pucks for shipping in ordinary railcars or shipping containers.

An oil company affiliated with the tiny Heart Lake First Nation in northern Alberta is building a $50-million pilot plant to test the “CanaPux” product developed by Canadian National Railway Co.

But it’s not known when a commercial facility would follow.

Pipeline efficiency

Reducing the demand for diluent in Canada could help Enbridge decide on the option to convert its Southern Lights pipeline — used to import U.S. condensate diluent into Canada — into a crude oil export pipeline with capacity of about 150,000 bpd, possibly by 2023.

Meanwhile, the operator of the biggest oil export pipeline network in Canada is getting creative as it looks at using drag reducing agents inside the pipe and redirecting some downstream U.S. injections to open up long-haul capacity for Western Canada, along with low-cost pipeline and pumping station upgrades.

It thinks it could add another 50,000 to 100,000 bpd of incremental export space by mid-year and is studying a potential 450,000 bpd of throughput optimization initiatives.

Crude-by-rail

Rail exports rose to a record of over 350,000 bpd in December before falling in January and February after Alberta imposed production cuts to reduce storage and open up space on pipelines.

They are on the rise again as Alberta loosens its production quotas and Imperial Oil Ltd. restarts rail shipments it stopped in February.

Crude shipped by rail often contains diluent but the NEB notes more oil can be put in each car if the oil isn’t diluted — although that requires the use of cars that can be heated at the destination dock to drain the bitumen.

Meanwhile, Alberta’s NDP government is pressing ahead with plans to add locomotives and railcars to move 120,000 barrels per day of crude, starting at the end of the year — although the opposition United Conservative Party has vowed to kill the order if it wins the provincial election this week.

Dan Healing, The Canadian Press

Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

‘It’s just my job’: Off-duty Peachland paramedic saves choking girl downtown Penticton

Family vacationing in Penticton assisted by off-duty paramedic, who helps save 13-year-old

Evacuation alert for homes near Dry Lake fire rescinded

Fire status changed to Under Control, crews remain on site patrolling and extinguishing hot spots

Morning Start: The human body contains trace amounts of gold

Your morning start for Friday, August 7, 2020

COLUMN: Listen to those who know about COVID-19

Accurate information is essential when understanding the pandemic

Penticton man wakes to wildfire, forced to evacuate from home

A wildfire sparked off the side of Highway 97 near Penticton on Thursday

VIDEO: U.S. Air Force pilot does fly-by for B.C. son amid COVID border separation

Sky-high father-son visit plays out over White Rock Pier

Central Okanagan adds 3,600 jobs in July: Statistics Canada

The region’s unemployment rate decreased by 0.2 percentage points to 10 per cent in July

Vandals target North Okanagan camper

COVID-19 ‘No camping’ warnings sprayed on local camper

Fundraiser launched for West Kelowna family who lost their home to fire

The family’s Sunview Drive home was destroyed after an accidental fire on Aug. 6

B.C. wildfire crews have battled 111 blazes in the last seven days

Twenty-nine fires remain active, as of Friday (Aug 7)

B.C. health minister applauds Kelowna Mayor, council for COVID-19 outbreak response

‘I think they are a model of how we respond’ - said Health Minister Adrian Dix

T-Rex earns big bids at B.C. dino auction

Over 500 dino-themed lots sold to buyers from across North America

‘We don’t make the rules’: Okanagan pub owner says staff harassed over pandemic precautions

‘If you have six people plus a baby, guess what? That’s seven’ - West Kelowna Kelly O’Bryan’s owner

Remembering Brent Carver: A legend of Broadway who kept his B.C. roots strong

Over the years, the Cranbrook thespian earned his place as one of Canada’s greatest actors

Most Read