January 2020, Vol. 247, No. 1
Editor's Notebook
Bottlenecks Crimping Alberta’s Style
EDITOR'S NOTEBOOK
By Michael Reed, Editor-in-Chief
With the largest oil producing province in Canada, Alberta, announcing it would cap output for January at 3.81 MMbpd – the same level as in December – operators continue to scramble for additional capacity.
At the moment, pipelines out of Western Canada are running at full capacity, which was limited at one point by the temporary shutdown of TC Energy’s Keystone pipeline. Additionally, a recently ended strike by the Canadian National Railway further reduced oil shipments for eight days. It was the nation’s longest rail strike in a decade, and its effects on oil shipments may be felt for weeks to come.
Even with these unpleasant developments and the postponements of such projects as the government-owned Trans Mountain Expansion (TMX) and Enbridge’s Line 3, operators are managing to squeeze more capacity by adding pumping stations and parallel pipes in some locations.
As a rather large example of this, Enbridge CEO Al Monaco said during a recent call with analysts that his company will be able to transport an additional 100,000 bpd on its Mainline System in early 2020. Enbridge also plans to add 50,000 bpd of capacity to its Express pipeline out to the United States.
“That extra 100,000 [bpd] comes from capacity recovery, and optimization of receipt and delivery windows, as well as the leveraging of Line 3 Canada,” Monaco said.
The Canadian section of the Line 3 replacement has been a bright note as the project recently began full operations. The $5.3-billion development, part of the largest project in the company’s history, saw aging pipe replaced along a 663-mile (1,067-km) route between Hardisty, Alberta, and Gretna, Manitoba.
Additionally, construction began in December on a portion of the TMX pipeline, which will ship additional Alberta oil to the British Columbia coast.
“You can see pipe on the ground and within days, maybe a couple of weeks, that pipe will be in the ground,” Trans Mountain CEO Ian Anderson, told the Calgary Herald. “It will be in the ground before Christmas. If everything goes according to plan, and nothing has for 10 years, I might add … we will be finished in mid-year to third quarter of 2022.”
Well, there is such a thing as having a positive outlook and also speaking frankly, and Anderson deserves credit for checking off both those boxes. And, of course, he is right. Most of the pushback over the TM. will come when construction moves its way into the lower-British Columbia mainland, where legal battles remain to be won and opposition forces tend to be much stronger.
Meanwhile, Alberta Premier Jason Kenney, who agrees Line 3 and the TMX, along with the and Keystone XL, are necessary for his province’s economic well-being, has taken the midstream-friendly approach of also wanting to restart the Northern Gateway and Energy East Pipelines; the first is an Enbridge project, rejected by the Canadian government in 2016, the latter was canceled by TransCanada in 2017.
This stance by Kenney came despite Monaco’s insistence that the Northern Gateway effort appeared to remain dead in the water.
“The first thing you need with something like that is commercial support, and I think at this point, just given where the basin is and the other projects that are in the queue, if you will, it would be tough to see that getting re-started at this point,” he said at a company general meeting.
With analysts for the most part agreeing that midstream infrastructure spending in Canada will probably decline slightly for the coming year – largely due to prices, legal concerns and transportation constraints – the outlook becomes fairly obvious: Pending expansions must be built on both sides of the U.S.-Canada border to give major companies and potential investors something to smile about.
It sounds simple but, of course, it is not simple at all. Still, it is what needs to happen, and the industry as a whole needs to be aggressively supportive of this effort.
Comments