Market Access Remains Key Driver to Pipeline Expansion
April 15, 2016U.S. President Barack Obama denied issuing a Presidential Permit for TransCanada’s Keystone XL pipeline in November 2015. TransCanada has issued a legal challenge to the decision in hopes of finally getting the controversial pipeline built. However, the political road block in front of one project won’t put a halt to Canada’s energy industry.
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Shortly after Obama’s decision, the the Canadian Association of Petroleum Producers (CAPP) responded by saying Canadian oil would continue find new paths to markets in Canada, the United States and emerging global markets.
“While President Obama stated that the Keystone XL decision is not in the U.S. national interest, Canada’s oil and natural gas industry is clearly in the Canadian national interest,” CAPP president and CEO Tim McMillan said in a Nov. 6 statement.
In arguing for pipeline’s approval, McMillan added that Canada is a stable, democratic country that develops its abundant natural resources responsibly with a strong focus on safety and the environment, noting Canada is the only country among the top suppliers of U.S. oil imports that has greenhouse gas (GHG) emission regulations in place.
“Canada has what the world needs, a reliable supply of energy that is produced safely and responsibly,” McMillan said. “Canadians will find a way to meet the demands of these global markets.”
A couple weeks after Obama’s decision, CAPP was lauding that Alberta’s Climate Leadership Plan provides direction that will allow Canada’s oil and natural gas industry to grow, further enhance its environmental performance through technological innovation and allow Canadian oil to reach more markets.
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“Improving market access for our oil and natural gas resources is one of the most pressing priorities of our industry to ensure that our sector can continue to grow and provide prosperity to Albertans and all Canadians,” McMillan said in a Nov. 22 statement.
In that effort, Canadian pipeline owners have a number of projects to expand crude oil transportation infrastructure that are under way, awaiting approval from the Alberta Energy Regulator (AER) or Canadian National Energy Board (NEB) or still in the planning stages. What follows is a selection of the major projects under review and in planning stages.
Energy East Pipeline Project
Location: Alberta, Saskatchewan, Manitoba, Ontario, Québec and New Brunswick
Overview: TransCanada has a 4,600-km pipeline that will carry 1.1 million bpd of crude oil from Alberta and Saskatchewan to refineries in eastern Canada and a marine terminal in New Brunswick. 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 pipe, and constructing the associated facilities, pump stations and tank terminals. TransCanada filed amendments to its application with the NEB in December to adjust the project route, and the board is in the process of reviewing the changes. The NEB is expected to issue a hearing order in early 2016. TransCanada expects to begin construction in late 2017, with service commencing in 2020.
Grand Rapids Pipeline Project
Stakeholder(s): TransCanada, Brion Energy
Overview: TransCanada has entered into binding agreements with Brion Energy Corp. (formerly 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 460 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. The project will be constructed, owned and operated by the Grand Rapids Pipeline LP, which is jointly owned by Brion and a wholly owned subsidiary of TransCanada. Grand Rapids Pipeline received regulatory approval from AER in October 2014. The pipeline is expected to begin initial crude transportation in mid-2016, with full capacity brought online in stages.
Horizon Pipeline Expansion
Stakeholder(s): Pembina Pipeline Corp.
Overview: Pembina announced in June 2015 the expansion its existing Horizon Pipeline System for an estimated capital cost of approximately $125 million. The 513-km Horizon pipeline was originally commissioned in 2008 and built to connect Canadian Natural Resources Ltd.’s Horizon Oil Sands facility to refineries, export pipelines and other delivery locations in the Edmonton area. Horizon is operated under the terms of a 25-year fixed return contract, which expires in 2034. The Horizon Expansion will increase the pipeline’s capacity up to 250,000 bpd, which will be achieved predominantly through the upgrading of mainline pump stations and other facility modifications, as required. Subject to regulatory and environmental approvals, the Horizon Expansion is expected to be in service mid-2016.
Northern Courier Pipeline System
Stakeholder(s): TransCanada Corp., 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 and Bitumen Extraction Facility to Suncor East Tank Farm located north of Fort McMurray, Alberta. The pipeline is fully subscribed with long-timer commitments. TransCanada received approval from AER in July 2014 and began construction in October 2014. The company expects begin pipeline operations in the second quarter 2017.
Northern Gateway Pipeline Project
Location: Alberta, British Columbia
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. The NEB Joint Review Panel approved the project in June 2014, pending 209 conditions. The company is in the process of addressing those conditions. Most recently, Enbridge filed the first phase of a Traditional Land Use (TLU) plan with the NEB in December 2015 as part of its compliance process. Enbridge will file any updates to the TLU at least six months prior to beginning construction on the project. One report estimated an in-service date of 2017 for the project, but Enbridge no longer gives an estimation on
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 to its Peace and Northern Pipeline system. The 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. As a result of strong customer demand, Pembina announced in September 2014 an additional 16-in. pipeline from Fox Creek to Namao, Alberta, which will be built on the same right of way of the 24-in. line. Once both pipelines are complete, Pembina will have four distinct pipelines in the Fox Creek to Edmonton corridor with a capacity of more than 1 million bpd. The Phase III Expansion is expected to be in service between in the first quarter 2017.
Trans Mountain Pipeline Expansion
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 a $5.4 billion 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. 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 in December 2013. The NEB heard oral summary argument from intervenors in two phases, on Jan. 19-29 and Feb. Pending regulatory approval, construction of the new pipeline could begin in 2017. The expanded pipeline would be operational in 2019.
Location: Manitoba, Saskatchewan and North Dakota
Overview: TransCanada is proposing to construct, own and operate the Upland Pipeline to connect Williston Basin crude oil from various production areas in North Dakota, Saskatchewan and Manitoba to oil transportation connection points near the Manitoba-Saskatchewan border in Canada. The proposed pipeline would begin southwest of Williston, North Dakota, cross the Canada-U.S. border near Flaxton, North Dakota, and end near the Manitoba-Saskatchewan border in Canada. The project would include approximately 400 km of 20-in. pipeline and related facilities, including valve sites, tanks and new pump stations along the proposed route. The pipeline would transport up to 300,000 bpd of crude and is scheduled to be in-service in 2020.
Vantage Pipeline Expansion
Location: Alberta, Saskatchewan and North Dakota
Stakeholder(s): Pembina Pipeline Corp.
Overview: In February 2015, Pembina announced the expansion of the Vantage pipeline system for an estimated capital cost of $85 million. The company acquired the pipeline system in September 2014. Vantage is a recently constructed, approximately 700-km high-vapor pressure pipeline that links a growing supply of ethane from the prolific North Dakota Bakken play to the petrochemical market in Alberta to aid in crude oil production. The Vantage Expansion entails increasing Vantage’s mainline capacity from 40,000 bpd to approximately 68,000 bpd through the addition of mainline pump stations and the construction of a new 80-km, 8-in. gathering lateral. The Vantage mainline expansion is supported by a long-term, fee-for-service agreement, with a substantial take-or-pay component, and the gathering lateral is underpinned by a fixed return on invested capital agreement. Subject to regulatory and environmental approvals, the Vantage Expansion is expected to be in-service in early 2016.
White Spruce Pipeline Project
Overview: TransCanada is proposing to construct, own and operate an approximately 72-km, 20-in. crude oil pipeline. The proposed White Spruce Pipeline project would begin at a tie-in point northwest of Fort McKay, Alberta, and end approximately 45 km west of Fort McMurray. The pipeline would provide increased capacity, safe transport and market access for growing volumes of crude oil produced in the Athabasca Oil Sands. White Spruce Pipeline is designed to deliver crude oil to the Grand Rapids Pipeline (currently under construction) and on to markets in the Heartland Industrial and Edmonton areas. Projected in-service date for the project is early 2018.
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.ca or the AER site at aer.ca.
This listing originally appeared in the February 2016 issue of North American Oil & Gas Pipelines, a sister publication of Trenchless Technology Canada.
Bradley Kramer is managing editor of North American Oil & Gas Pipelines and a contributing editor to Trenchless Technology Canada.