Canada’s oil, gas pipelines in flux

Gary Park

For Petroleum News

In 2012, Canada produced 3.38 million barrels per day of crude and 13.9 billion cubic feet per day of natural gas, with the vast bulk shipped by pipelines to markets in Canada and the United States and little affected by rationing, the National Energy Board reported in its latest energy market assessment.

While noting that dramatic technical advances have made it possible to economically produce oil and gas from tight and shale formations in North America and while output from the Alberta oil sands has growing steadily the ability of producers to reach markets was only slightly impeded.

The report said existing oil pipelines have generally been full since 2007, new pipeline projects are under way and more oil is moving by rail, while new sources of U.S. gas are entering Canada through Ontario, reducing throughput on TransCanada’s mainstay pipeline to Eastern Canada.

“Energy markets have been responding to these changes,” the NEB said. “Some adjustments happen quickly, while other adjustments take time.”

Although some toll increases were approved on the TransCanada and Enbridge mainlines, most of those charges were stable over the assessment period, with some toll issues resolved through adjudicated proceedings or a complaint process.

“Financial ratios have remained stable and credit ratings have continued to be an investment grade for the Canadian pipeline sector,” the NEB said, noting that returns on equity varied from 9.36 percent to 11.5 percent for the leading group of pipelines.

The emergence of rail as a crude carrier gathered momentum in 2012, with about 123,000 bpd exported to the U.S. during the first 11 months of 2013, with 108,000 bpd destined for PADD I and PADD III markets.

Oil pipeline utilization on the Enbridge mainline and Lakehead systems, which are designed to carry 2.5 million bpd, was affected by capacity constraints on U.S. sections, lowering capacity out of Western Canada to Superior, Wisconsin, to 1.9 million bpd.

The 300,000 bpd Trans Mountain system (planned for expansion to 890,000 bpd) from Alberta to the Canadian and U.S. West Coasts achieved average throughout of 290,000 bpd in 2012 and 297,000 bpd in the first half of 2013.

The first leg of TransCanada’s Keystone system from Alberta to market hubs in Illinois offers total export capacity of 591,000 bpd and is operated under long-term contracts with shippers.

Because of work on faulty equipment at two pumping stations, throughout in 2012 averaged 505,000 bpd and edged up to 515,000 bpd in the first half of 2013, the NEB said.

The most dramatic shift has been occurring on the TransCanada mainline gas system — a network of pipes covering 8,500 miles — which has been battered by the rise of shale gas production in the U.S.

For the first nine months of 2013, average volumes on the Prairies section was 2 billion cubic feet per day, with average utilizations at 45 percent in 2011, 34 percent in 2012 and 29 percent in the January-September period of 2013, reflecting the impact of changes in supply sources, especially in U.S. northeast markets.