Skip to comments.Oilsands nearing pipeline pinch
Posted on 03/28/2012 4:56:50 AM PDT by thackney
Crude-on-crude competition for export pipeline space is moving up predictions for a pinch point faced by oilsands producers that some observers warn will have to postpone or scrap future expansions, unless new pipe is laid.
Fast-growing supplies of conventional crude from North Dakota and western Canadian provinces are fighting for room in pipelines with rising bitumen output, the Canadian Energy Research Institute said in a report Monday, forecasting that by 2015 oilsands growth could grind to a halt should no additional lines be built.
Other observers acknowledged they are also retooling their outlooks with a similar view, citing a well-documented explosion of oil output in North Dakota and Saskatchewan and lesser-known growth trajectory for new oil plays in Manitoba, Alberta and even B.C. The trend is playing out across North America, as energy firms un-lock previously un-economic oil from deep underground thanks to recent technological advances. "If no new pipeline capacity is added, (oilsands) projects will be cancelled and delayed," said CERI report author Dinara Millington in an interview.
Current export capacity amounts to about 3.5 million barrels per day, Millington noted in CERI's annual report on costs and development of oilsands projects, arguing combined oilsands and conventional crude production will exceed that by 2015.
With the recent U.S. denial of the proposed Alberta-to-Texas Keystone XL line and extended regulatory hearings faced by the Northern Gate-way project envisioned to the West Coast, new capacity is not certain, she said.
The warning comes as Canadian oil producers already grapple with per-barrel price discounts relative to the U.S. benchmark that have hit $38 for the heavy oil benchmark and $26 for light in the last couple months, differentials blamed on growing production confronting pipeline pressure restrictions, as well as a glut in supply and refinery downtime south of the border.
CERI, a think-tank funded by industry and government, assumes the northern portion of Keystone XL will be approved but won't start operating until 2016 - a year later than proponent TransCanada Corp. has suggested - causing a capacity shortfall. The disturbing prediction is painted as a missed opportunity, considering the industry's massive growth outlook. The report highlights bitumen production expected to grow to 3.3 million barrels per day by 2020 and 5.4 million barrels a day by 2045.
That's against a backdrop of lower future costs assumed to get the molasses-like crude out of the ground - a range of $45 and $90 a barrel - with the Alberta government poised to gain $8.50 to $12 in royalty revenues on each barrel.
The Oil Sands Developers Group puts current oilsands production at about 1.85 million barrels per day.
"Oilsands projects are profitable, they're viable, they're commercially developable but the big 'but' is being locked in Alberta with nowhere to get out," Millington said.
Other analysts who have put the oil pipeline pinch point anywhere between 2014 and 2017 are bumping up their forecasts. The Canadian Association of Petroleum Producers is revising its view earlier, likely to around 2015, thanks to "burgeoning" conventional oil output in Western Canada and North Dakota, said Greg Stringham, vice-president of markets and oilsands at the industry group.
"All of that oil ends up being transported on the same pipelines," Stringham said, confident Keystone XL will be approved and that other options will come available to prevent oilsands project delay or cancellation, including rail that's increasingly moving crude to market.
Steve Fekete, managing consultant of IHS Purvin & Gertz in Calgary, said his consultancy is in the midst of reassessing its current export pipeline bottleneck forecast of 2014 to 2016, and is considering conventional oil output growth.
"This is one factor which could potentially accelerate the pinch point," Fekete said.
Got to put it someplace.
WE have the means to become independent of Middle East oil but our government and Obama do not have the desire.
They want high priced energy and their Green Agenda.
If we don’t start building some more refineries - none for the past 35yrs+ - the spring shutdown for “summer blends” and 0bummer’s closing of other older refineries, will raise gas prices at-the-pump to the unimaginable levels of Europe, within 3-4mos.
Of course Canada can lay pipe in the direction of China...to BC shipping oil terminals.
This is not an issue anymore. We have expanded an upgraded our existing refineries for many years.
Combined with falling demand, we now exceed our refined product demand with refinery capacity. Because of this we are now a net exporter of refined products. We still import about 9 million barrels a day of crude oil. But some of that is refined and shipped back out at higher prices than the crude, which helps our trade balance and keeps more jobs in the US.
New pipelines heading for the coast down here,all coming from the Eagle Ford.
Like there wasn’t 10,000 pipelines already in the ground here. LOL
Looks like we’re still under-capacity, t:
Oh, but I thought the democrats already told us we’d reached “peak oil”. Where can all this oil be coming from?
How can we be under capacity if we are running the refineries at 82~86% capacity and still be making more product than we use?
That is over capacity, not under.
The latest month values are for Dec 2011.
We used 16,127,000 BPD.
We had operating refinery capacity of 16,980,000 BPD.
On top of that, we had 745,000 BPD operable, but idle.
Make sure you are not counting Natural Gas Liquids in your numbers. When they talk about total petroleum they count NGLs like propane, but most of that comes from Natural Gas Processing plants.
If you include the NGLs, then you need to include the NG Processing plants with the refineries.
Those numbers are not as up to date as refineries and they have grown significantly in the last couple years. It is cleaner to leave them out of the comparison, or you will have to use older data.
A thread about this topic, over here: