... Market Access Drives Pipeline Expansion Amid Low Oil Prices  

Market Access Continues to Drive Pipeline Expansion Amid Low Oil Prices

While oil prices have dropped below $50 per barrel, expanding market access continues to be a long-term need for Canadian oil and gas producers. Despite lower revenues — the current estimated cost of a barrel of oil in Canada is around $35 — oil product is still expected to grow in 2015.

These figures were the subject of a recent revised forecast released by the Canadian Association of Petroleum Producers (CAPP) on Jan. 21. The association estimates a total $23 billion reduction in 2015 capital investment in Western Canada, including an $8 billion reduction in oilsands spending and $15 billion in conventional oil and gas. However, CAPP projects oil production to grow by an average of 150,000 barrels per day (bpd) to 3.6 million bpd in 2015.

/*** Advertisement ***/

Last year’s Canadian Oil Pipelines Report showed that Canadian pipeline companies were planning projects that move product eastward to the dense population centers in Ontario and Quebec. Those pipelines and initiatives to expand current capacity to these regions continue to be major driving factors in project development, as well as efforts to build pipelines to the West Coast for export.

“Canada has the opportunity to be the supplier of choice at home and in the global market and that’s why market access, by all means, in all directions, is so critically important to improve the health, wealth and quality of life of all Canadians, even with the current declines in prices and investment,” said CAPP president Tim McMillan.

There are a number of oil pipeline projects currently under construction or awaiting approval from the Canadian government, many of which will expand already existing transportation systems that transport crude from the oil sands to various markets. What follows is an overview of those projects and their current progress:

Edmonton to Hardisty Pipeline
Location: Alberta
Stakeholder(s): Enbridge Pipelines Inc.
Overview: Enbridge proposes to construct and operate a new 181-km, 36-in. pipeline to transport crude oil from the company’s existing Edmonton Terminal to its Hardisty Terminal. The project also includes the construction and operation of a new initiating pump station at the Edmonton Terminal, construction and operation of two new pump stations at its existing Kingman and Strome stations, as well as associated facilities and infrastructure at its Edmonton and Hardisty terminals. The proposed pipeline right-of-way will be alongside and contiguous to an existing Enbridge pipeline right-of-way and other linear disturbances for approximately 96.6 percent of its length. If approved, the pipeline would deliver crude oil to other existing pipelines and facilities located in the Hardisty area, including delivery onto the Enbridge Mainline system.
Progress: Construction began in May 2014, and the project is expected to be in-service the first quarter of 2015.

Energy East Pipeline Project
Location: Alberta, Saskatchewan, Manitoba, Ontario, Québec and
New Brunswick
Stakeholder(s): TransCanada
Overview: TransCanada has a 4,500-km pipeline that will carry 1.1 million bpd of crude oil from Alberta and Saskatchewan to refineries in eastern Canada. The project would involve converting an existing natural gas pipeline to an oil transportation pipeline, constructing new pipelines in Alberta, Saskatchewan, Manitoba, eastern Ontario, Québec and New Brunswick to link up with the converted pipeline, and constructing the associated facilities, pump stations and tank terminals required to move crude oil from Alberta to Québec and New Brunswick, including marine facilities that enable access to other markets by ship. The exact route will be determined after public and regulatory review, but the planned starting point is a new tank terminal in Hardisty, Alberta. Three other new terminals will be built along the pipeline’s route, in Saskatchewan, the Québec City area and the Saint John, New Brunswick, area. The terminals in the Québec City and Saint John areas will include facilities for marine tanker loading. The project will also deliver oil to existing Québec refineries in Montréal, near Québec City and in Saint John.
Progress: NEB will be accepting applications to participate in the joint panel review process until March 3, with the hearing expected shorty thereafter. TransCanada began a consultation program in 2013 and expects to file for regulatory approval later this year. Preliminary in-service dates for Montreal and Quebec City are set for mid-2017 and for Saint John in late 2018.

Grand Rapids Pipeline Project
Location: Alberta
Stakeholder(s): TransCanada, Phoenix Energy Holdings Ltd.
Overview: TransCanada has entered into binding agreements with Phoenix Energy Holdings to develop the Grand Rapids Pipeline project in northern Alberta. Each company will own 50 percent of the proposed $3 billion pipeline project that includes both a crude oil and a diluent line to transport volumes approximately 500 km between the producing area northwest of Fort McMurray and the Edmonton/Heartland region. The system will have the capacity to move up to 900,000 bpd of crude oil and 330,000 bpd of diluent. TransCanada will operate the system and Phoenix has entered a long-term commitment to ship crude oil and diluent on it. The final Grand Rapids Pipeline route and design will be determined with Aboriginal and stakeholder input, as well as consideration for environmental, archaeological and cultural values, land use compatibility, safety, constructability and economics. The project will be constructed, owned and operated by the Grand Rapids Pipeline LP, which is jointly owned by Phoenix and a wholly owned subsidiary of TransCanada.
Progress: Grand Rapids Pipeline applied for regulatory approval for the project in 2013. Pending AER approval, the pipeline is expected to be in service by early 2017, with capital spent between 2014 and 2017.

Heartland Pipeline Project
Location: Alberta
Stakeholder(s): TransCanada
Overview: The Mackenzie Gas Project (MGP) is a proposed 1,196-km natural gas pipeline and gas gathering system, liquids extraction, liquids pipeline and related field developments along the Mackenzie River valley of Canada’s Northwest Territories. The NEB approved the project in March 2011, but included a requirement that construction must commence by December 2015. The project proponents continue to monitor ways to move the project forward, but so far natural gas market conditions do not signal a commercially viable opportunity.

Northern Courier Pipeline System
Location: Alberta
Stakeholder(s): TransCanada, Fort Hills Energy LP
Overview: TransCanada was selected by Fort Hills Energy to design, build, own and operate the proposed $660 million Northern Courier Pipeline project, which comprises a 90-km pipeline system to transport bitumen and diluent between the Fort Hills mine site and the Voyageur Upgrader located north of Fort McMurray, Alberta. The pipeline is fully subscribed under long-term contract to service the Fort Hills mine, which is jointly owned by Suncor Energy Inc., Total E&P Canada Ltd. and Teck Resources Ltd., and is operated by Suncor Energy Operating Inc. Northern Courier is conditional on and subject to the Fort Hills project receiving sanction by its co-owners and obtaining regulatory approval.
Progress: TransCanada has started engaging with Aboriginal communities and stakeholders about the pipeline route and has initiated environmental field studies. In April 2013, the company filed an application with the Alberta Energy Regulator (AER), formerly the Energy Resources Conservation Board (ERCB). TransCanada received approval from AER in July 2014 and expects to have the system in service by mid-2016.

Northern Gateway Pipeline Project
Location: Alberta, British Columbia
Stakeholder(s): Enbridge
Overview: 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. A 36-in. diameter oil pipeline would carry 525,000 bpd of crude westward from Edmonton, Alberta, to Kitimat, B.C., where the product could then be taken by ship to the Pacific Rim countries or U.S. markets on the West Coast. The second pipeline (20-in. diameter) would transport 193,000 bpd of natural gas condensate eastward. Condensate is used to thin petroleum products for pipeline transport.
Progress: The NEB approved the project in June 2014, pending 209 conditions.
Enbridge is currently addressing the board’s conditions before it can begin construction. The estimated in-service date of 2017.

Pembina Phase III Expansion
Location: British Columbia, Alberta Stakeholder(s): Pembina Pipeline Corp.
Overview: Pembina Pipeline plans to proceed with constructing approximately $2 billion in pipeline expansions. The 540-km Phase III Expansion will follow and expand upon certain segments of the company’s existing pipeline systems from Taylor, British Columbia, southeast to Edmonton, Alberta, to fulfill capacity needs. The core of the project involves the construction of a new 270-km, 24-in. diameter pipeline from Fox Creek, Alberta, to the Edmonton area, which is expected to have an initial capacity of 320,000 bpd and an ultimate capacity of more than 500,000 bpd with the addition of midpoint pump stations. Once complete, Pembina will have three distinct pipelines in the Fox Creek to Edmonton corridor. The expansion may also include increasing pipeline interconnectivity between Edmonton and Fort Saskatchewan at Pembina’s Redwater and Heartland hub sites, as well as third-party delivery points in these areas. This interconnectivity will provide the option for customers to access a broad variety of delivery points including fractionators, refineries and storage hubs and increased access to pipeline and rail take-away capacity.
Progress: Pembina expanded the proposed capacity of the project in September 2014. Pending regulatory approval, the company expects the Phase III Expansion to be in service between late 2016 and mid-2017, subject to environmental and regulatory approvals.

Trans Mountain Pipeline Expansion Project
Location: Alberta, British Columbia
Stakeholder(s): Kinder Morgan
Overview: For more than 60 years, the Trans Mountain Pipeline system has been providing the only West Coast pipeline access for Canadian oil products. From the time when Trans Mountain was first constructed in 1953, the pipeline system has adapted to meet the growing needs of customers. The pipeline system was most recently expanded in 2008 as part of the Anchor Loop Project. Approximately 158 km of pipeline was twinned between Hinton, Alberta, and Hargreaves, British Columbia. Now, the company is proposing an expansion of its current 1,150-km pipeline between Strathcona County, Alberta (near Edmonton), and Burnaby, British Columbia. The proposed expansion would create a twinned pipeline that would increase the nominal capacity of the system from 300,000 bpd to 890,000 bpd.
Progress: Kinder Morgan conducted an open season from fall 2011 to fall 2012 and received strong binding support. In January 2013, the company signed new long-term contracts with 13 committed customers. The company filed an application with the NEB on Dec. 16, 2013. Pending regulatory approval, construction of the new pipeline could begin as early as 2015 or 2016, with an in-service date in late 2017.

Woodland PipelineExtension Project
Location: Alberta
Stakeholder(s): Enbridge, Imperial Oil Ltd.
Overview: The Woodland Pipeline is a 137-km, 36-in. pipeline that went into service in September 2012 to transport crude oil from the Kearl oil sands to the Cheecham Terminal, with an initial pipeline capacity of 200,000 bpd. Enbridge is developing a 385-km, 36-in. pipeline to extend the Woodland Pipeline. The project would also include two new two new pump stations, one at the Roundhill Station and the other at the Cheecham Terminal.
Progress: Construction activities began north of the La Biche River heading toward Enbridge’s existing Cheecham Terminal in November 2014. All pipeline construction is expected to be complete this spring.

This is not a comprehensive list of the oil pipeline projects in Canada. For more information about these and other projects, you can visit the NEB website at neb-one.gc.ca2015  or the AER site at aer.ca.
North American Oil & Gas Pipelines provides quarterly updates of oil and gas pipeline projects in the United States in Canada. The next update will be May, covering U.S. oil pipeline projects.

Bradley Kramer is managing editor of North American Oil & Gas Pipelines. Contact him at bkramer@benjaminmedia.com.

Tags: , ,