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Released September 14, 2017 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--A new technology being developed by the University of Calgary aims to prevent oil spills by making heavy Canadian crude oil into easy-to-transport pellets that would ostensibly be easier to clean up and perhaps prevent oil spills from pipelines. Transporting these pellets would instead be the job of Canada's huge crude-by-rail system, which would carry them in coal cars. As with any new technology, the questions of necessity, utility and economy must be addressed before it is implemented in any meaningful way. Can this technology be developed in time to be useful with the numerous high-diameter takeaway projects planned for the Canadian Oil Sands? Even if it is developed in time, is there a market for it or intermediary infrastructure and facilities to handle this pelletized crude oil?
In order for this technology to be necessary, there must be a demand for crude to be moved by means other than pipeline, the cheapest and safest option, despite the seemingly endless stories of ruptures. As it stands, crude-by-rail is the alternative for Alberta crude oil to reach market, and is the vehicle by which pelletized crude oil would be shipped. Currently, crude-by-rail is primarily a stop-gap measure to get product to market until pipeline capacity and access is able to meet shipper demand. Thus, pelletized crude oil has a window in which it will find demand, and therefore be both useful and economical: between the current bottleneck and the future point when pipeline capacity catches up.
Canada continues to increase its crude oil production, cresting at 3.8 million barrels per day (MM BBL/d), 2.4 MM BBL/d of which was from the Alberta Oil Sands in 2016, according to numbers from the Canadian Association of Petroleum Producers (CAPP). There is also a persistent bottleneck of pipeline takeaway capacity leading out of Alberta, which has been made up by crude-by-rail. Physical pipeline takeaway capacity currently sits at about 2.2 MM BBL/d, according to Industrial Info data, with another 3.2 MM BBL/d currently being planned. The four major takeaway projects are the Trans Mountain Expansion Project by Kinder Morgan Incorporated (NYSE:KMI) (Houston, Texas), Energy East by TransCanada Corporation (NYSE:TRP) (Calgary, Alberta), Keystone XL and the Line 3 Reactivation by Enbridge Incorporated (NYSE: ENB) (Calgary, Alberta). These projects would come online in two stages: the end of 2019, and the end of 2021.
However, TransCanada is seeking to suspend its regulatory application for the Energy East project for at least 30 days after Canada's National Energy Board (NEB) said it would toughen its review process, and the Minnesota Commerce Department told state regulators this week that it sees no need for the U.S. component of Enbridge's Line 3 Reactivation project that would run through that state. For related information, see September 11, 2017, article - TransCanada Seeks to Slow Pipeline Application Amid Tougher Review.
Kinder Morgan last week announced it has selected or signed memorandums of understanding with six contractors to build the Trans Mountain pipeline expansion. For related information, see September 11, 2017, article - Kinder Morgan Picks Contractors for Trans Mountain Pipeline Project.
According to CAPP, by the end of 2019, total Canadian oil production is forecasted to reach over 4.5 MM BBL/d. If all the major takeaway projects currently being developed are built and placed in service at their maximum capacities by the end of 2019, takeaway capacity will crest at 4.4 MM BBL/d. If Energy East comes online in 2021, takeaway capacity will outstrip Canadian production, according to CAPP's forecasts. This gives pelletized crude oil almost a 5-year window in which to be developed and brought to market. However, is the market ready for it?
Crude oil, when shipped by rail, is moved in specially-regulated, heated tank cars. Pelletized crude oil is meant to be shipped by coal cars. Before crude oil is delivered to its final crude unit destination at a refinery, it is stored in floating-roof tanks, however terminals like those at Cushing likely do not have the facilities to store the pellets in solid form. Also worth considering is the temperature of the environments through which the crude pellets will be transported. Will the pellets stick to one another if the temperature goes up? Will that mean they need to be transported in cooled coal cars, and do such cars exist or need to be developed? If this crude is sent to northern Canadian refineries, such as Valero Corporation's (NYSE:VLO) (San Antonio, Texas) Jean Gaulin Refinery, then the temperature may not be an issue. It would also capitalize on the lack of competition from pipelines as there is no direct route from Alberta to eastern Canada via pipe until the currently planned completion of Energy East in in late 2021.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
In order for this technology to be necessary, there must be a demand for crude to be moved by means other than pipeline, the cheapest and safest option, despite the seemingly endless stories of ruptures. As it stands, crude-by-rail is the alternative for Alberta crude oil to reach market, and is the vehicle by which pelletized crude oil would be shipped. Currently, crude-by-rail is primarily a stop-gap measure to get product to market until pipeline capacity and access is able to meet shipper demand. Thus, pelletized crude oil has a window in which it will find demand, and therefore be both useful and economical: between the current bottleneck and the future point when pipeline capacity catches up.
Canada continues to increase its crude oil production, cresting at 3.8 million barrels per day (MM BBL/d), 2.4 MM BBL/d of which was from the Alberta Oil Sands in 2016, according to numbers from the Canadian Association of Petroleum Producers (CAPP). There is also a persistent bottleneck of pipeline takeaway capacity leading out of Alberta, which has been made up by crude-by-rail. Physical pipeline takeaway capacity currently sits at about 2.2 MM BBL/d, according to Industrial Info data, with another 3.2 MM BBL/d currently being planned. The four major takeaway projects are the Trans Mountain Expansion Project by Kinder Morgan Incorporated (NYSE:KMI) (Houston, Texas), Energy East by TransCanada Corporation (NYSE:TRP) (Calgary, Alberta), Keystone XL and the Line 3 Reactivation by Enbridge Incorporated (NYSE: ENB) (Calgary, Alberta). These projects would come online in two stages: the end of 2019, and the end of 2021.
However, TransCanada is seeking to suspend its regulatory application for the Energy East project for at least 30 days after Canada's National Energy Board (NEB) said it would toughen its review process, and the Minnesota Commerce Department told state regulators this week that it sees no need for the U.S. component of Enbridge's Line 3 Reactivation project that would run through that state. For related information, see September 11, 2017, article - TransCanada Seeks to Slow Pipeline Application Amid Tougher Review.
Kinder Morgan last week announced it has selected or signed memorandums of understanding with six contractors to build the Trans Mountain pipeline expansion. For related information, see September 11, 2017, article - Kinder Morgan Picks Contractors for Trans Mountain Pipeline Project.
According to CAPP, by the end of 2019, total Canadian oil production is forecasted to reach over 4.5 MM BBL/d. If all the major takeaway projects currently being developed are built and placed in service at their maximum capacities by the end of 2019, takeaway capacity will crest at 4.4 MM BBL/d. If Energy East comes online in 2021, takeaway capacity will outstrip Canadian production, according to CAPP's forecasts. This gives pelletized crude oil almost a 5-year window in which to be developed and brought to market. However, is the market ready for it?
Crude oil, when shipped by rail, is moved in specially-regulated, heated tank cars. Pelletized crude oil is meant to be shipped by coal cars. Before crude oil is delivered to its final crude unit destination at a refinery, it is stored in floating-roof tanks, however terminals like those at Cushing likely do not have the facilities to store the pellets in solid form. Also worth considering is the temperature of the environments through which the crude pellets will be transported. Will the pellets stick to one another if the temperature goes up? Will that mean they need to be transported in cooled coal cars, and do such cars exist or need to be developed? If this crude is sent to northern Canadian refineries, such as Valero Corporation's (NYSE:VLO) (San Antonio, Texas) Jean Gaulin Refinery, then the temperature may not be an issue. It would also capitalize on the lack of competition from pipelines as there is no direct route from Alberta to eastern Canada via pipe until the currently planned completion of Energy East in in late 2021.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
