As labour shortages are going to take a short while to be dealt with through the importation of "guest workers" on top of already getting Newfoundlanders to fly in weekly while energy throughout the province is already stretched to beyond capacity, the pipeline problem is the third de facto part of an existing physics-based moratorium. With all of these shortages and the US Dep't of Energy screaming for quadrupling tar sands bitumen production, our strategy to block new pipeline construction at the least slows down the entire project.
--M
Oilsands face pipeline space shortage
Energy; Oil bubble expected to swell; Frantic work to bolster networks, build new ones;
Claudia Cattaneo, Financial Post Saturday, August 25, 2007
CALGARY - A new problem is bubbling in Canada's growing oilsands industry: too much oil and not enough pipeline space to move it.
Production from the deposits is growing so much, so fast, producers and pipeline companies are looking for ways to mitigate the impact of an oil bubble expected to swell by November and last for as long as 18 months.
The likely short-term fixes: periods of pipeline rationing, shut-in production, oil put in storage.
Meanwhile, oil prices in Canada could weaken relative to those in the United States until more space unplugs the bulge.
"Every year we are forecasting increased production, and there hasn't been a lot of pipeline expansion recently, and now it just gets more urgent," said Colette Craig, oil market analyst at the National Energy Board. Pipelines are already full, and "in the next year to 18 months it could become a bigger problem."
Forecasters predict Canadian oil volumes will increase 8% this year alone, to approximately 2.8 million to 2.9 million barrels a day. By 2020, oilsands growth is expected to propel Canada's overall production to between 4.6 million and 5.3 million b/d.
Pipeline companies are working frantically to bolster existing networks and build new ones. By 2010, an additional 1.3 million b/d of additional capacity is expected to be available to the West Coast, the U.S. Midwest and Ontario.
But only two modest expansions are coming next year: Enbridge Inc. of Calgary is adding 60,000 barrels a day early in the year with the expansion of its Southern Access pipeline to the United States. Dallas-based Kinder Morgan Inc. is adding capacity of 40,000 barrels a day by November, 2008, in its Trans-Mountain system to the West Coast.
The next major pipeline isn't coming until 2009, when Calgary-based TransCanada Corp.' s Keystone kicks in with 435,000 barrels a day of new space. The project, which involves some new construction and the conversion of an existing gas pipeline, has yet to receive NEB approval.
"It's going to be tight. We believe we and all the other pipelines will be pretty full," said Rick Sandahl, senior vice-president at Enbridge, whose oil pipeline network moves two million barrels a day of Canadian oil to Western Canada, the United States and Ontario. "There will be instances when there will be disruptions.
"Certainly [apportionment is] the last thing that we want, but if it gets to that point, everything possible will be done to ensure as much crude as possible is moved to market," he said.
If apportionment is necessary, space will be pro-rated among shippers so that everyone shares the burden, he said.
Mr. Sandahl said pipeliners and producers have been trying for years to match pipeline space with new oilsands projects, but it's hard to build consensus and find solutions.
It also takes longer to build pipelines than it used to because communities are more involved.
"There is need for more communication and understanding, working with the community and the land owners," Mr. Sandahl said.
Experts say it's hard to pinpoint how much oil could be stranded, as oil supplies tend to bounce around and could be affected by factors as unpredictable as an oil project or a refinery shutting down for maintenance, freeing up pipeline space for others.
he Canadian Association of Petroleum Producers says growth in supplies this year and next will come in spurts from several in-situ projects, as well as two big ones: at the end of 2007, the Long Lake project, equally owned by Nexen Inc. and OPTICanadaLtd., is expected to start up; the Horizon project, owned by Canadian Natural Resources Ltd., will kick in at the end of 2008.
CAPP vice-president Greg Stringham said apportionment is most likely from late 2007 to the first months of 2008. The pipeline system should be adequate from mid to late 2008, and then there it will be tight again at the end of 2008.
"We have been through apportionment before several times and we just hope that this time we will be able to avoid it in the long term, but realizing that it's hard to have those pipeline expansions match the projects that are coming along," Mr. Stringham said.
A significant oil bulge is likely to result in a disconnect between prices in Canada and the United States.
Already, Canadian heavy oil is discounted during the winter, when there is less demand, but the pipeline crunch could mean higher quality oil could also sell for cheaper, Ms. Craig said.
