BNN Bloomberg's commodities update: Oct. 10, 2018
Even before the discount on Canadian crude began a brutal streak of new lows in recent days, a variety of efforts were under way to help alleviate Alberta’s persistent crude-shipping bottlenecks. Here’s a look at the major projects in the works as well as a few longer-term solutions:
Line 3 Expansion and Replacement
Owner: Enbridge Inc.
New capacity: 370,000 barrels per day
Expected in-service date: 2019
Cost: $7 billion
Route: Hardisty, Alberta, to Superior, Wisconsin.
Products carried: Light, medium and heavy crude.
More: Construction of the expanded and replaced Line 3 was 40 percent completed in Canada as of August and is fully finished in Wisconsin. The only remaining unbuilt stretch is in Minnesota, where the company received a key regulatory approval in June. Enbridge expects to continue working on state and federal permits through the fourth quarter, with construction commencing early in 2019.
Owner: TransCanada Corp.
New capacity: 830,000 barrels per day
Expected in-service date: 2021
Cost: $8 billion
Route: Hardisty, Alberta, to Steele City, Nebraska.
Products carried: Heavy crude
More: While TransCanada has yet to officially commit to building this extension of its existing Keystone system, the company has started prep work like clearing brush in Montana. It’s also negotiating with landowners in Nebraska, where it received its final major state approval last year, and as of August had negotiated easements for about 62 percent of the route in the state. The project still faces legal challenges in the Nebraska Supreme Court and federal court in Montana.
Trans Mountain Expansion
Owner: Canadian federal government
New capacity: 590,000
Expected in-service date: TBD
Cost: $5.7 billion
Route: Strathcona County, Alberta, to Burnaby, British Columbia.
Products carried: Heavy crude, light crude, synthetic crude, gasoline, diesel.
More: Despite this project remaining entirely within Canadian jurisdiction, it still may have the highest regulatory hurdles to clear. A Federal Court of Appeal quashed the project’s regulatory approvals in August, and the Canadian Government has now asked the National Energy Board to conduct an additional study on the effects on marine life near the shipping terminal at the project’s terminus. The deadline for that work to be completed is in February 2019, potentially allowing construction to resume next year, though the government says it will provide a new timeline for the full project once it becomes available.
Riding the Rails
Canada’s rail system already is working to alleviate some bottlenecks. Canadian railroads shipped almost 200,000 barrels of oil a day to the U.S. in July, close to the record 216,000 hauled in May. Last month, Canadian National Railway Co. and Canadian Pacific Railway Ltd. signed deals with Cenovus Energy Inc. to transport about 100,000 barrels of heavy crude daily. Deals with other large producers are expected to follow.
Blast From the Past?
Canadian Association of Petroleum Producers President Tim McMillan has in recent speeches and interviews floated the idea of reviving the Northern Gateway pipeline, an Enbridge project that Prime Minister Justin Trudeau’s government rejected in 2016. TransCanada’s Energy East, which the company abandoned last year, is another possibility.
Alberta’s government has pledged $1 billion to help pay for partial upgraders that would lighten oil-sands bitumen to help it flow through pipelines, and it’s providing $500 million in royalty credits for new plants to turn crude into plastics, fabrics and fertilizers. Premier Rachel Notley hinted on Tuesday that more initiatives along these lines are in the works and may be announced in the coming weeks.
The Magic of Engineering
The existing pipelines that carry Canadian oil probably could squeeze through more crude with innovations such as drag-reducing additives. Enbridge said last year that it can add 500,000 barrels a day through low-cost expansions that require minimal permitting.
New technologies also are in the works. Canadian National said last year that it’s working with Calgary-based Toyo Engineering Canada Ltd. to design and build a pilot project to turn bitumen into pellets that are easier to ship by rail or on regular container ships that don’t face bans in environmentally sensitive coastal areas.
--With assistance from Robert Tuttle and Kevin Varley