Western Canada is blessed with extraordinary hydrocarbon resources and in recent years has been ramping up production in the Alberta oil sands and in the Duvernay and Montney shale plays. The U.S. is pretty much Canada’s only crude oil and natural gas customer, though, and there are limits to how much Canada can export to its southern neighbor — especially in the Shale Era, with the U.S. producing more oil and gas than ever and meeting an increasing share of its own needs. So Canadian producers, midstream companies and others have been working to gain access to new, overseas markets. It has not gone well. Pipeline projects to transport oil and gas to the British Columbia coast have been set back time and again, as have plans for crude and LNG export terminals. At last, there may be some good news. The Canadian government has stepped in to help push through a critically important oil pipeline to the coast, and BC’s leading LNG project just signed on a major new investor/customer. Today, we consider recent moves that could finally allow large volumes of Western Canadian oil and gas to be shipped to Asia.
In this Drill Down Report, we take a detailed look at the infrastructure and changing flow and pricing dynamics in Louisiana that will play a critical role in serving global LNG demand and balancing the U.S. gas market. We start by defining the flow model and an analysis of historical and recent flow patterns along the seven pipeline corridors. We then consider the various factors that will continue to drive change in the region over the next five years and wrap up with our outlook for Louisiana flows and pricing.
NEW Backstage Pass Drill Down Report
Down Louisiana Way – Emerging Bottlenecks in the Bayou State: Louisiana’s Gulf-Bound Pipeline Capacity Key to Balancing U.S. Gas Market
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The challenges faced by producers in Canada’s western provinces have been discussed many times in the RBN blogosphere. Most recently, in a six-part blog series, The Shape I’m In, we looked at (among other things) the big price discount for Western Canadian Select (WCS, the regional crude benchmark) vs. West Texas Intermediate (WTI), the continuing rise in oil sands and other Western Canadian Sedimentary Basin (WCSB) production (now at about 4 MMb/d), the need for more takeaway pipelines and the resurgence of crude-by-rail. And in the On the Border and Don’t Do Me Like That series, we examined the gas side of things, including growing production (now near 16 Bcf/d), takeaway constraints, and fierce competition from Marcellus/Utica and other U.S. shale plays that has been forcing Western Canadian producers out of U.S. and Eastern Canadian markets they traditionally served.
For a number of years now, the dream of Alberta and BC producers has been to access overseas markets — especially Asian consuming giants like China, India, Japan and South Korea — that are clamoring for more crude and more gas (the latter in the form of LNG). But the dream has been just that. Let’s begin with a look at the oil side. As we said more than five years ago in the aptly titled West Coast Pipe Dreams, there is only one crude oil pipeline from the WCSB to Canada’s West Coast: Kinder Morgan’s 300-Mb/d Trans Mountain Pipeline (green line in Figure 1). It runs from Edmonton, AB, to Kinder’s Burnaby Terminal and the Parkland Fuel refinery (tan triangle) in the Burnaby, BC, area; Kinder’s Westridge Marine Terminal (also near Burnaby), and the U.S. border at Sumas, WA, where it connects to Kinder’s Puget Sound Pipeline for delivery to four Washington state refineries (light green triangles). That same blog noted that after open seasons in 2011 and 2012, Kinder Morgan announced plans to increase Trans Mountain’s capacity. At first (in April 2012), the plan was to boost it by 450 Mb/d (to 750 Mb/d); later (in January 2013), the company said that additional shipper interest warranted a 590-Mb/d expansion (to 890 Mb/d). The Trans Mountain Expansion (TMX) project would involve the installation of new pipeline that would parallel the existing Trans Mountain Pipeline for the majority of its route. Also, 12 new pump stations would be added, as would a total of 19 new tanks at existing terminals in Burnaby (14 tanks), Sumas (one tank) and Edmonton (four tanks). In addition, three new berths (each capable of loading Aframax-class crude carriers) would be constructed at the Westridge Marine Terminal.
