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Pipeline capacity need highlighted by crude supply growth

Despite renewed optimism for pipeline projects, a history of delays in the review process raises the possibility of additional price volatility and loss of economic value for Western Canadian producers

Western Canada may see a supply increase of nearly a million barrels of crude by 2020, putting increasing pressure on an already constrained pipeline system that has struggled with delay in bringing incremental pipeline capacity online, says a new report by IHS Markit.

Entitled Pipelines, Prices and Promises: The story of Western Canadian Market Access, the Canadian Oils Sands Dialogue report from IHS Markit examines the relationship between pipelines and prices, the implication of delay in new pipeline capacity that has occurred in western Canada and the current outlook for the industry.

Absent new pipeline takeaway capacity, Canadian crudes will face limitations from the existing pipeline infrastructure as Western Canadian volumes continue to build, the report says. 

“The need for new pipelines departing Western Canada has not diminished with lower oil prices, quite the opposite,” said Kevin Birn, energy director for IHS Markit, who leads the Oil Sands Dialogue. “Canada remains a growth story with production volumes increasing since the oil price collapse. And with continued growth it appears inevitable that volumes will overtake an already-constrained system and create a resurgence of crude-by-rail.”

The report notes that transportation costs are a key reason why oil prices differ between regions. While quality differences—such as light versus heavy oil—result in price differences between different types of crude oils, transportation costs contribute to price differences between regions for crude of the same quality. 

Capacity constraints in the past have contributed to price volatility, a rise of crude-by-rail shipments and a loss of economic value for Western Canadian producers, the report says. During one such period of constraint — a five-month period starting November 2012 through March 2013 — Western Canadian Select crude realized approximately $30/bbl less than Mexican Maya, a crude of similar quality. The difference in price equaled approximately $6 billion in lost revenue over that period. 

A survey of recent major pipeline proposals conducted for the report found that the length of the pipeline review process (from first application through the end of 2016) has averaged more than five years per project, creating uncertainty for project proponents and western Canadian producers alike. 

Although the recent approvals of Keystone XL by the Trump Administration and Trans Mountain Expansion by the Government of Canada have returned a level of optimism for pipeline projects, potential for additional delays exists, the report says.

If four major pipeline projects (Alberta Clipper Expansion, Energy East, Keystone XL and TransMountain Expansion) advance as currently proposed, they could add 2.9 million barrels per day of new capacity between 2019 and 2022, enough to move Western Canadian pipeline takeaway capacity from shortage to surplus. 

The report notes that, although the United States (the Gulf Coast in particular) remains the most likely market for growing Canadian heavy production due to the regions pre-existing refinery capacity capable of processing heavier crudes, lessons from the timing of Keystone XL and concerns over a possible resurgence of U.S. protectionism have highlighted the importance of market diversification. 

As none of the currently proposed pipeline would come online prior to 2019, a resurgence of crude-by-rail shipments out of Western Canada is likely to occur through the end of the decade, the report concludes. 

“Greater price discounts for Western Canadian crudes would return with an increase of crude-by-rail shipping,” Birn said. “Such discounts are likely to be more modest than in previous years as past investments in crude-by-rail infrastructure — such as loading terminals and railcars —would pay off. But the fact remains that you will still see increased price volatility and loss of value for producers until adequate pipeline capacity is restored.”

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Government, opponents weigh in on NEB Trans Mountain decision

Southern Resident Killer Whales. – NOAA Fisheries West Coast on flickr; used under Creative Commons license

The decision by the National Energy Board to approve continued work on the Trans Mountain Pipeline Expansion was welcomed by its owner, the Canadian government, while opponents have suggested that any attempt to restart construction will end with court challenges.

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Instrumentation, Systems & Automation

Winters’ PEM now available with vibration dampening solution

Winters StabiliZR™ dampened movement eliminates pointer  flutter caused by vibration and pulsation.

The PEM-ZR Economy StabiliZR gauge is now available from Winters. The StabiliZR version of the PEM economy gauges is available in 1.5" (40mm) to 4" (100mm) dial sizes, bottom and back connections from 1/8" to 1/4" NPT and ranges from vacuum to 5,000 psi/kPa. PEM-ZR is a general purpose gauge for plumbing, hydraulic and other applications where pulsation and vibration are present.

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NEB opens door for continued Trans Mountain work with reconsideration report

A tanker passes through Vancouver harbour from Burrard Inlet. – Flickr - user geoffdude; used under Creative Commons license

The National Energy Board (NEB) has delivered its Reconsideration report to the Government of Canada, with an overall recommendation that the Trans Mountain Expansion Project (Project) is in the Canadian public interest and should be approved. 

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NASTT No-Dig Show set for March 17-21 in Chicago

NASTT's 2019 No-Dig Show blends education and technology through its topnotch Technical Program, which features over 160 peer-reviewed, high-quality technical papers, as well as opportunities for Continuing Educations Units (CEUs).

NASTT's 2019 No-Dig Show will take place March 17-21, 2019 at the Donald E. Stephens Convention Center. The conference will host more than 200 exhibitors and over 2,000 attendees who include public works, contractors, engineers, utility owners, damage prevention and industrial facility personnel.

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Tourmaline adds reserves through 2018

After ten years of operation, Tourmaline has 2P natural gas reserves of 11.7 tcf and 2P liquid reserves of 505.2 mmboe of oil, condensate and liquids (December 31, 2018).  The Company has the largest publicly-reported, independently-assessed, 2P natural gas reserves in Canada.

Tourmaline Oil Corp. is pleased to report very strong total reserve growth, liquids reserve growth and a continued reserve value increase in the current depressed natural gas price environment.  The Company executed on the 2017-2018 plan to concentrate almost entirely on internal EP growth and has produced the best reserve metrics in the Company's 10 year history over the past two years.

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Inter Pipeline hits financial and operating records in 2018

Inter Pipeline Ltd., in its financial and operating results for the three and twelve-month periods ended December 31, 2018, announced a record $1.1 billion in funds from operations, a 10 percent increase over the previous year, with its natural gas liquids processing business reaching a record annual FFO of $445 million.

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Sulzer Mixpac offers new protective coating dispensing system

Sulzer Mixpac USA, Inc., an innovator of 2-component adhesive dispensing systems, announces the availability of MIXPAC MixCoat Manual, a member of the innovative MIXPAC MixCoat cartridge-based 2-component dispensing system family. The MixCoat Manual protective coating dispensing system features a lightweight design with a unique brush assembly on a manual dispenser, which greatly increases stripe coating productivity and speed. The MixCoat Manual system is ideal for repairs and rope work on offshore oil and gas, petrochemical, marine, and bridge repair applications. 

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Netzsch adds xLC stator adjustment to triple service life of pumps

Another component has been added to the product portfolio of the NEMO progressing cavity pump from NETZSCH: the xLC unit. This unit triples the service life of the pump, particularly when conveying difficult, abrasive media. When wear occurs in the rotor-stator system, the new xLC unit allows the performance of the pump to be re-established by adjusting the preload between the conveyor elements. 

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Rockwell, Schlumberger start joint venture to create integrated automation solutions provider

The Sensia joint venture will be the first fully integrated provider of measurement solutions, domain expertise, and automation to the oil and gas industry.

Rockwell Automation, which is dedicated to industrial automation and information, and Schlumberger, a leading provider of technology for reservoir characterization, drilling, production, and processing to the oil and gas industry,  have entered into an agreement to create a new joint venture, Sensia, the first fully integrated digital oilfield automation solutions provider.

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GTI quantifies opportunity to produce low-carbon Renewable Natural Gas (RNG) from wood wastes

The engineering design study, funded by West Coast utilities and a state government agency, was conducted to better understand the value, benefits, and cost of utilizing wood wastes to reduce greenhouse gas (GHG) emissions.

Today, GTI has released a site-specific engineering design titled Low-Carbon Renewable Natural Gas (RNG) from Wood Wastes. GTI led a team of engineers and scientists to produce a "blueprint" for converting an existing biomass facility into an RNG production site, using the wood waste feedstock and some of the existing infrastructure. A biomass power plant in Stockton, California, was the host site for the engineering design effort. In addition to providing data about the process technologies, the integrated plant, and production costs, the study highlights the many environmental benefits and the low-carbon fuel produced. 

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Instrumentation, Systems & Automation

Siemens showcases smart solutions for industry-specific implementation of Industrie 4.0

By integrating future technologies into its portfolio, Siemens is offering users new and far more extensive scope for leveraging the exponential growth in industrial data.

Siemens will be placing smart solutions for the industry-specific implementation of Industrie 4.0 at the heart of its Hannover Messe 2019 presentation under the banner "Digital Enterprise - Thinking industry further!" Over an exhibition space of around 4,000 square meters in Hall 9, Siemens will be showcasing these solutions with an array of new additions to its Digital Enterprise offering designed to enable the digital transformation of the discrete and process industries. 

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Performance, power and luxury combine in 2019 Ram Heavy Duty

“Ram Heavy Duty owners constantly demand the highest levels of capability to tackle the biggest jobs and with up to 15,921 kg (35,100 lb) of towing capacity, pulled by 1,000 lb.-ft. of torque from our Cummins engine, we now hold the most important titles within the segment,” said Reid Bigland, Head of Ram Brand, FCA.

Debuting during media day of the Canadian International AutoShow, the 2019 Ram Heavy Duty is the most powerful, most capable pickup in the segment, the manufacturer states, with a towing capacity of up to 15,921 kg (35,100 lb) and a maximum payload capacity of  up to 3,484 kg (7,680 lb). Driving it all is a never-before-seen torque rating of 1,000 lb.-ft. from the Cummins 6.7-litre High Output Turbo Diesel engine. The new Ram Heavy Duty also sets benchmarks in ride and handling, luxury, materials, innovation and technology, extending well past any competitive offerings. Giving maximum effort all day, every day with confidence, the new 2019 Ram Heavy Duty line of pickups steps forward with the full force of modern capability.  

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Operations strong but challenging Canadian industry knocks Cenovus for net loss in 2018

Overall, Cenovus's 2018 upstream financial results were significantly impacted by widening light-heavy oil price differentials, which reached historical highs in the fourth quarter, as well as realized hedging losses of $1.6 billion largely in the first three quarters of the year.

Cenovus Energy Inc. delivered strong operating performance in 2018 but took a financial hit in the process, the company reported in its year-end results release. While solid production continued across Cenovus operations, a $1.3 billion loss in the fourth quarter pushed it to a net loss of $2.9 million for the year.

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Oil and gas price forecasts tempered; DBRS sees no impact on credit ratings

Oil and gas price forecasts tempered; DBRS sees no impact on credit ratings

With growing evidence of a softening in global economic activity, DBRS Limited (DBRS) is tempering its base case price forecast for West Texas Intermediate (WTI) oil and Brent Oil over the period 2019 through 2021. DBRS is also reducing its base case forecast for the spot price of natural gas delivered at AECO in Alberta due to continued weak supply and demand fundamentals for Canadian natural gas. A CAD/USD exchange rate of 0.75 (versus 0.78 previously) has been assumed over the forecast period to align with current exchange rates. The current forecasts are updated from the previous forecasts published on October 26, 2018. See the commentary "DBRS Updates Oil and Gas Price Forecasts: Discounted Commodity Prices in Canada Remains the Prevailing Theme."

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