Varcoe: Enbridge targeting increased pipeline volumes

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As “inexperienced shoots” emerge within the Canadian oilsands and operators roll out aggressive plans to extend manufacturing, Enbridge sees the necessity for extra oil pipeline capability by 2026.

Nevertheless, don’t count on a serious new export pipeline venture in Western Canada’s future.

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As a substitute, incremental expansions and plans to tweak present strains are within the works to bolster the transportation capability for oil popping out of Canada.

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Throughout the firm’s investor day on Wednesday, Enbridge indicated it expects to extend the capability of its Mainline oil pipeline community by 200,000 barrels per day (bpd) — beginning in 2026 — as manufacturing climbs within the Western Canadian Sedimentary Basin.

In line with the Calgary-based firm, further pipeline capability will probably be wanted as petroleum producers ramp up output by 500,000 bpd by the top of 2025.

Enbridge’s Mainline system, which moved about 3.2 million bpd in the course of the fourth quarter, is already full.

The federally owned Trans Mountain pipeline is anticipated to begin industrial operations of its enlargement venture within the coming months.

“As has occurred up to now, as quickly as folks suppose there’s an excessive amount of pipeline capability, there’s extra manufacturing being produced,” Enbridge CEO Greg Ebel advised reporters after the assembly.

“There most likely gained’t be a serious pipeline construct, however at this cut-off date, I feel with the volumes we’re speaking about . . . with low capital and optimization of the present belongings that now we have, we are able to add these further volumes.”

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Producers in Western Canada have been cranking up manufacturing over the previous 12 months as world demand reaches document ranges — greater than 102 million barrels per day — and with the anticipated completion of the Trans Mountain enlargement.

On Tuesday, oilsands producer Cenovus Vitality laid out plans to spice up its manufacturing to about 950,000 barrels of oil equal (boe) per day by 2028, up about 150,000 bpd from fourth-quarter volumes.

Canadian Pure Assets pumped out an all-time excessive of 1.42 million boe per day in the course of the October-to-December interval, up 9.6 per cent from a 12 months earlier. And Suncor Vitality reported fourth-quarter output climbed to 808,000 boe per day, a six per cent bounce from a 12 months earlier.

“Provide progress has shocked,” Colin Gruending, Enbridge’s president of liquids pipelines, mentioned throughout Wednesday’s assembly. “We’re seeing inexperienced shoots within the oilsands portfolio.”

Complete oil manufacturing from Western Canada, which averaged 4.7 million barrels per day final 12 months, may strategy 5 million bpd this 12 months, and get shut to five.4 million bpd by the top of this decade, mentioned Kevin Birn, a vice-president with S&P International Commodity Insights.

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South of the border, manufacturing has additionally set new output data over the previous 12 months, averaging 13.3 million bpd in December, in accordance with the U.S. Vitality Info Administration.

“Canadian oil and fuel goes to develop, U.S. manufacturing will hit data and the necessity for transportation has by no means been higher,” mentioned Birn.

“A case could possibly be made for a brand new incremental pipeline, if somebody have been courageous sufficient to tackle that enterprise.”

For years, that new pipeline was the Trans Mountain enlargement (TMX), which was authorized by Canadian regulators and the federal authorities in 2016.

The pipeline is anticipated to start industrial operations in the course of the second quarter, transporting oil from Alberta to the B.C. coast for export. The federal Crown company that runs the pipeline known as for oil from shippers final week.

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The enlargement will improve the present pipeline’s capability by 590,000 barrels per day.

The venture has been delayed a number of instances — it was anticipated at one level to be accomplished by late 2019 — and its price ticket has skyrocketed above $30.9 billion from $5.4 billion.

However given the demise of three different pipeline tasks up to now decade — Vitality East, Keystone XL and Northern Gateway — consultants don’t count on to see one other main export venture proposed in Canada any time quickly.

Chris Bloomer, former CEO of the now-defunct Canadian Vitality Pipeline Affiliation and a former oilpatch govt, mentioned oilsands producers are taking tasks off the shelf to extend output.

As soon as the Trans Mountain enlargement fills up, extra egress out of Western Canada will probably be wanted.

“Everyone will probably be gun-shy about proposing something new. They’ve discovered from the previous,” Bloomer mentioned in an interview.

“It will be very tough — financially, organizationally, emotionally and politically. I don’t suppose we will probably be in a spot to have a serious new venture come to the desk.”

Requested beneath what situation the federal authorities would help further oil pipelines, Pure Assets Minister Jonathan Wilkinson mentioned it’s necessary to get TMX into operation. He additionally pointed to forecasts by the Worldwide Vitality Company displaying demand for fossil fuels hitting a peak this decade.

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“If of us wish to convey ahead proposals with respect to pipelines that they’re excited by constructing, clearly we’d take into account that,” Wilkinson mentioned.

“However I might additionally say that to construct a pipeline is multibillions of {dollars}, and one has to have some extent of certainty across the projections for demand over many years.”

Optimization and enlargement of present pipelines, together with rising the quantity of crude moved by rail, are potential options to permit transportation to maintain up with output later within the decade.

Ebel mentioned the corporate can spend modest quantities of capital on expansions and use drag-reducing brokers to spice up the capability of its Mainline system.

“We are able to proceed to be bullish. I feel we are able to proceed to be optimistic concerning the alternatives for the Western Canadian Sedimentary Basin,” he added.

“And I feel we are able to proceed to be optimistic concerning the pipeline capabilities, past an enormous construct out, to really add these volumes.”

Chris Varcoe is a Calgary Herald columnist.

cvarcoe@postmedia.com

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