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

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

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.

Just Posted

Scooters lined up for an educational event in Stuart Park on Wednesday, June 16. (Amandalina Letterio/Capital News)
Free e-scooter safety training in Kelowna

Shared e-scooter operators collaborate to educate riders

The suspect reportedly assaulted a security guard and robbed him. The incident happened at a Kelowna hotel. (Contributed)
Okanagan Lake (File photo)
Thompson-Okanagan ready to welcome back tourists

The Thompson-Okanagan Tourism Association expects this summer to be a busy one

Employees at Playtime Casino wait outside while firefighters inspect the building after a small storage room fire on Wednesday, June 16, 2021 (Amandalina Letterio/Capital News).
Small fire at Kelowna’s Playtime Casino as staff preps to re-open

Fire ignited in the storage room, but the staff were able to put it out

Maxwell Johnson is seen in Bella Bella, B.C., in an undated photo. The Indigenous man from British Columbia has filed complaints with the B.C. Human Rights Tribunal and the Canadian Human Rights Commission after he and his granddaughter were handcuffed when they tried to open a bank account. THE CANADIAN PRESS/HO-Heiltsuk Nation, Damien Gillis, *MANDATORY CREDIT*
VIDEO: Chiefs join human rights case of Indigenous man handcuffed by police in B.C. bank

Maxwell Johnson said he wants change, not just words, from Vancouver police

A mother stands with her daughter, visiting senior parents but observing social distancing with a glass door between them.  The granddaughter puts her hand up to the glass, the grandfather and grandmother doing the same.  A small connection in a time of separation during the Covid-19 pandemic (Valley First/Contributed).
Have your say on which Okanagan, Thompson, Similkameen charities get donation

Valley First seeks public help to distribute $250,000 to local charities via social media campaign

Tk’emlups te Secwepemc Chief Rosanne Casimir stands outside the former Kamloops Indian Residential School after speaking to reporters, in Kamloops, B.C., on Friday, June 4, 2021.THE CANADIAN PRESS/Darryl Dyck
Kamloops chief says more unmarked graves will be found across Canada

Chief Rosanne Casimir told a virtual news conference the nation expects to release a report at the end of June

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Vernon Courthouse. (Jennifer Smith - Morning Star)
Sentencing delayed in North Okanagan child pornography case

Man who pleaded guilty to possessing child pornography will have new sentence date fixed next week

A woman wears a vaccinated sticker after receiving a COVID-19 vaccine at a vaccination clinic run by Vancouver Coastal Health, in Richmond, B.C., Saturday, April 10, 2021. THE CANADIAN PRESS/Jonathan Hayward
B.C. ranks among highest in world in COVID-19 first-dose shots: health officials

More than 76% of eligible people have received their 1st shot

People decided to tag Skaha Bluffs rocks which the Ministry has to go in and now clean up. (Facebook)
Bluffs at popular Penticton rock climbing park defaced

Ministry of Environment is going to clean it up

A screenshot of the First Peoples Cultural Councils First Peoples’ Map. (First Peoples Cultural Council)
Online resource blends B.C.-Alberta’s Indigenous languages, art and culture

Advisor says initiative supports the urgent need to preserve Indigenous languages

An artists conception of the new terminal building at the Pitt Meadows Regional Airport.
Air travel taking off in B.C., but lack of traffic controllers a sky-high concern

There will be demand for more air traffic controllers: Miller

Most Read