As several pipeline majors press ahead with their embattled plans to add capacity for getting Alberta crude and oil sands production to market, Calgary-based Inter Pipeline has announced a $3.7-billion plan for in-province propane dehydrogenation (PDH) and polypropylene (PP) production.
Oil sands producers have met the challenge of reducing their incremental costs per barrel, but now are increasingly frustrated by delays that midstream companies have faced in building new pipelines or even expanding existing ones. While the PDH-PP project will hardly alleviate the crude bottleneck, it shows that industry is exploring many midstream and downstream options.
The Heartland Petrochemical Complex is planned for
Inter Pipeline is a petroleum transportation, NGL processing and bulk liquid storage company. Its pipeline systems run 7,700 km and move 1.3 million bbl/d. The NGL business is one of the largest in Canada, processing an average of 3 billion cubic feet per day (Bcf/d) in 2016, with the capacity to produce over 240,000 bbl/d of NGL. Inter also operates 16 petroleum and petrochemical storage terminals in
In Alberta, the looming shortfall in crude takeaway was highlighted by the outage of TransCanada’s Keystone Pipeline in mid-November. That took about 600,000 bbl/d of transportation off the market and spiked the WCS Hardisty discount by $3.25/bbl between Nov. 15 and Nov. 22, according to Morningstar. The line began to return to service by the end of November, but the warning was clear.
Broadly speaking, there is supply/demand balance in the province. Production sits at about 4 million bbl/d; there are 730,000 bbl/d of regional refining, and 3.33 million bbl/d of takeaway, according to Morningstar. But Canada’s National Energy Board forecasts output increasing by 1.3 million bbl/d to 4.29 million bbl/d in 2018 to 5.62 million bbl/d in 2030, primarily from new oil sands production.
Three major pipeline projects have been drawn up to meet that demand. The Enbridge Line 3 replacement will add 350,000 bbl/d to the existing line from Edmonton to Superior, Wis. That is not a huge volume, but the project has the advantage of already being approved by the U.S. government and is already underway. Completion is due in 2019.
The second project is about twice the size. Kinder Morgan Inc. plans to treble its 300,000 bbl/d Trans Mountain line from Edmonton to tidewater at Vancouver. The expansion is optimistically slated to be in service by 2020, but has been vexed by government conditions and environmental opposition. Senior industry officials have been particularly frustrated at resistance from
Third and largest is the 830,000-bbl/d Keystone XL Pipeline to expand and connect the Keystone Pipeline. The project has gained international attention as a political and environmental football through two
“Kinder Morgan already has shipper commitments for Trans Mountain, but there are doubts about its permitting progress in British Columbia,” wrote Sandy Fielden, director of oil and products research at Morningstar in a Nov. 27 report. “TransCanada is looking for more solid shipper commitments for Keystone XL that would be easy to get if Trans Mountain is postponed, but they probably need to make an investment decision before the latter’s fate is decided.
“Producers are reluctant to make long-term pipeline commitments in an era of lower crude prices and shorter investment cycles,” he wrote. “Midstream companies like TransCanada are nervous about building pipelines in the hope that shippers will show up, rather than waiting for upfront commitments. The net result could stagnate
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