Bridging the Energy Gap |
January 16, 2012 |
Enbridge Builds Safe Pipelines to Serve North America
By Bradley Kramer
Ever since the company began in 1949, Enbridge has been on a rapid path toward dominance in the North American oil and gas pipeline industry. Starting as the Interprovincial Pipe Line Co., the company changed its name to Enbridge in 1998.
The Interprovincial pipeline was originally designed to transport crude oil from Leduc, Alberta, to refineries in Regina, Saskatchewan, but over the ensuing decade the system expanded to serve markets in Ontario and Wisconsin. At more than 1,800 km, the pipeline at the time was the longest ever constructed in the world, forming the backbone of Canada’s energy transportation network.
Today, Enbridge ships more than 2 million barrels of oil per day and delivers more than 400 billion cubic feet of natural gas each year. The company operates the longest oil and liquids pipeline system in the world, with approximately 24,600 km of pipelines in Canada and the United States. And now, Enbridge is screening a pipeline project that will open up access to the Asian market for western Canada’s oil supply.
The Northern Gateway system would include two 1,177-km pipelines from Alberta to the British Columbian coastline, with associated storage tanks and terminals, at a cost of $5.5 billion. Crude oil could then be taken by ship to the Pacific Rim countries, where demand rocketed upward over the past few years. The Canadian National Energy Board (NEB) began hearings about the project on Jan. 10.
Meanwhile Enbridge continues to expand its pipeline network with the majority of its slated projects located in northern Alberta, the U.S. Midwest and the Gulf Coast regions, according to Byron Neiles, senior vice president of the major projects group for Enbridge.
“All throughout our mainline system, there are various expansion efforts, whether it’s twinning, looping or adding tanks or horsepower to a pipeline,” Neiles says. “In regions like Oklahoma, we’re very dominant.”
The major projects group is responsible for cost estimation and project development for major pipeline and facilities construction projects with a price tag of $50 million or more in Canada and the United States. Once the project is commissioned, the group is responsible for its execution.
The oil sands in Alberta continue to be a driving force for system expansion, but Enbridge has also experienced strong growth in its Bakken shale development in the Williston Basin region straddling the borders of Saskatchewan, Montana and North Dakota. From the natural gas side, the company has a strong presence in the Gulf Coast region, especially in Texas and Oklahoma, with the shale plays there.
Safe Crossings
As Enbridge continues to expand its oil and gas pipelines and facilities, the industry as a whole has experienced increased scrutiny from the public and governmental regulators with an intensified focus on safety.
Over the past two years, a series of unfortunate events in the energy industry resulted in more stringent regulatory oversight. In July 2010, Enbridge was at the center of attention with a leak to its Lakehead system in Marshall, Mich. Enbridge was quick to respond and worked to restore the environmental damage.
These events led to a heightened public awareness of oil and gas transportation infrastructure and construction. In response, Enbridge has increased its investment in quality programs and improved its safety procedures.
“It has meant, first of all, when a project goes to a regulatory proceeding, there’s more scrutiny on design, on quality inspection, on integrity and all the evidentiary information,” Neiles says. “We welcome that.”
Enbridge has also advanced its companywide “safety culture” to improve all aspects of project development.
“While we’ve always had vendors with a robust quality record, we’ve gotten better at embedding our own inspectors with our vendors as belts and suspenders to support those processes and up our investment in quality control.”
From a safety perspective, Enbridge must also consider the contractors it hires to build its pipelines. The company must ensure it properly vets the people who work on the jobsites.
“One of the implications of growth in 2012 forward is that we will surpass our record of capital spent during the peak of 2008 and 2009, which means we’ll be employing more mainline and facilities contractors than we ever have in our history,” Neiles says. “The challenge in advancing Enbridge’s safety culture will not just be with the contractors we know, but also the new companies we’ll be working with.”
Enbridge has implemented a set of “leading indicators” and life-saving rules that the company requires its contractors to adopt as a prerequisite of working for Enbridge. Additionally, the major projects group has joined forces with DuPont Sustainable Solutions to help them get beyond just having a low incidence rate, but to create an environment where workers independently intervene in an unsafe situation vs. looking to management for direction.
“It’s not good enough to reach an excellent total recordable frequency (TRF),” Neiles says. “Veterans can become complacent. We want to end unsafe behavior, and we don’t want younger workers to adopt it. We want to nip complacency in the bud and make sure it’s not exacerbated by younger workers.”
Enbridge has found that a majority of the contractors it is working with are already on the same page regarding its safety culture.
“They’re of like mind and know it’s not a cake walk,” Neiles says. “The contractors that are going to work with us are adopting our leading indicator behavior.”
Aside from ensuring that its employees adopt strong safety values, Enbridge must also be a good steward of the environment, says Mark Maki, senior vice president of Enbridge and president of the company’s master limited partnership Enbridge Energy Partners.
“The challenges of this more stringent regulatory environment are that we have got to be fair to land owners and fair to the states we’re dealing with,” Maki says. “Safety has to be paramount in the processes we use in developing these resources. We have to be a safe and responsible operator, we have to be a good neighbor to the state where we’re doing business and we have to be good neighbor to the land owners. Safety is job No. 1 for any pipeline operator, plain and simple.”
In that effort, Enbridge has developed a comprehensive public awareness program to communicate with the public, emergency responders, excavators and local governments about pipeline safety. The company provides information on warning signs of potential pipeline emergencies and how to respond, as well as information about one-call notification requirements to help prevent third-party damage. The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) conducts periodic audits of this public awareness program to make sure it meets regulatory requirements.
Give Us Some Gas
Enbridge has been aggressive in the natural gas market, developing pipelines and facilities in the Southwest. The company’s footprint in this sector is predominantly in Texas and Oklahoma, with three large gathering systems in eastern Texas, northern Texas, the Texas Panhandle and western Oklahoma.
Natural gas accounted for about 35 percent of Enbridge’s earnings last year, Maki says, and the company is committed to further developing these systems.
“In the long run it’s a very important growth platform for the company,” Maki says. “There will continue to be an increased use of natural gas in North America for energy and hopefully in transportation. Natural gas is going to be a major source of energy for North America going forward. We hope to leverage that into our long haul pipes.”
Although Enbridge remains strong with established natural gas reserves in North America, shale gas is becoming an ever-increasing supply source for the company.
“We’ve built a lot of pipelines to service shale gas, especially in the Haynesville region, where we have 20- to 36-in. pipelines to serve the residential market,” Maki says. “In the Barnett shale, we’ve built processing plant additions. And in the Anadarko region, there’s a lot of construction and a lot of development of facilities to access emerging plays.”
Put Your Bakken to it
Over the past decade, the Bakken shale region on the border between the United States and Canada has become an increasingly strong resource for light, sweet crude.
North Dakota has become the No. 3 producer of oil in the United States because of the Bakken formation, says Kevin Hatfield, senior director of gathering systems for Enbridge Pipelines (North Dakota).
“That oil is not only important to the Williston Basin, but to North America’s overall energy security, allowing for less reliance on foreign oil,” Hatfield says. “Bakken has been taking on a huge amount of growth in the last five years.”
Enbridge purchased two legacy systems in the Williston Basin in the early 1990s. The gathering pipelines straddled the Canada-U.S. border, one serving southeastern Saskatchewan and Manitoba and the other serving western North Dakota and northeastern Montana. The two systems had served the region for 50 years. Enbridge was fortunate that the footprint of these gathering lines overlaid the Bakken formation.
“We’re uniquely placed to capitalize on the growth of the Bakken development,” Hatfield says. “Speaking from the North Dakota perspective, the current trend is going to continue. We’re seeing a ramping up of production, 20 to 30 barrels per day, month over month. I see that continuing in 2012.”
In the last six years, Enbridge has tripled its capacity in the North Dakota system. Up until 2005, the gathering system had a capacity of 80,000 barrels per day. Through a series of six expansions, the company increased capacity to 210,000 barrels per day. The company just announced a rail project to provide interim capacity until another expansion pipeline can be built to further open access to its Bakken system.
Bridge to the Future
Enbridge is preparing for more expansion in 2012.
Last winter, the company was preparing for a down year after a record three years of expansion. A number of its customers had delayed projects for 2011, and Enbridge was looking for areas to redeploy people or possibly enact layoffs.
“But all of a sudden after Christmas, oil prices rose and led to projects kicking off,” Neiles says. “So we started 2011 far more active and more optimistic than at year-end 2010.”
Neiles sees the oil and gas industry trending upward in 2012, but he notes that the increased regulatory scrutiny on projects has caused some major projects, like TransCanada’s Keystone XL pipeline, to be delayed, which affects the supply chain and could cause a tightened labor market in Canada and the United States. Still, he expects Enbridge to add more personnel this year.
“When we look at the forecasts from a number of sources, industrial capital expenditures will increase across all lines of business,” Neiles says. “We will need to hire at least 200 more people in the coming year. That doesn’t include the mainline contractors we’ll be employing. All told, we’ll be engaging thousands of people for projects on both sides of the border.”
Bradley Kramer is associate editor of North American Oil & Gas Pipelines. Contact him at bkramer@benjaminmedia.com.
Enbridge Continues to Expand Capacity
Projects Serve Gulf Coast and Bakken Shale
Enbridge continues to expand its energy delivery infrastructure in the rapidly growing Bakken region, as well as in the Gulf Coast. Two recent project announcements will greatly expand its oil delivery capacity in North America.
On Dec. 22, 2011, the Canadian National Energy Board approved the company’s Bakken Pipeline Project Canada, which will extend an existing pipeline from Berthold, N.D., to Steelman, Saskatchewan, by constructing 124 km of 16-in. diameter pipeline to transport crude oil between a new Bakken Pump Station, near the existing Enbridge Westspur Steelman Terminal, and the existing Enbridge Pipeline Inc. Cromer Terminal, near Cromer, Manitoba. The U.S. segment of this pipeline is currently owned by Enbridge Pipelines (North Dakota), a subsidiary of Enbridge Energy Partners.
While progress continues at expanding pipeline capacity in the Bakken region, Enbridge will also build a $145 million rail facility near the Berthold station. This expansion will increase takeaway capacity from Berthold by 80,000 barrels per day.
The rail project includes the construction of a double-loop unit-train facility, crude oil tankage and other terminal facilities adjacent to its existing facilities near Berthold. The system will have the ability to stage three unit-trains at Berthold at any given time. An initial start-up phase will begin at 10,000 barrels per day of export capacity in July 2012, with the full export capacity scheduled to be in-service by early 2013, before completion of Enbridge’s Bakken Expansion Program.
Down South, Enbridge will proceed with its Gulf Coast Access project, which the company announced on Dec. 20 that it has secured sufficient capacity commitments from shippers. The project will offer crude oil transportation from its terminal at Flanagan, Ill., to the U.S. Gulf Coast. Enbridge also announced that in response to shipper requests it will hold a second open season early in 2012 to provide an opportunity for shippers to subscribe for additional capacity.
The Gulf Coast Access project will involve construction of an additional line from Flanagan south to Cushing, Okla., following Enbridge’s existing Spearhead Pipeline right of way. This line is expected to be in service by mid-2014 at an estimated capital cost of approximately $1.9 billion. From Cushing, crude oil will move to Houston and Port Arthur, Texas, on the Seaway Pipeline system owned by a joint venture between Enbridge and Enterprise Products Partners.
Enbridge bought ConocoPhillips’ 50 percent share of the Seaway system in November 2011, and the new partners soon after decided to reverse the flow of crude oil to better serve the Gulf region.