Oil-sands expansion projects coming online and the resulting need for more diluent are among the drivers behind a number of midstream infrastructure projects in the province of Alberta, including natural gas processing plants and fractionators; oil and diluent pipelines; and oil/NGL storage facilities. The total volume of work is surprising, considering the fact that oil-sands production economics are iffy right now, if not downright upside down. Today, we continue our look at midstream projects under development within Canada’s Energy Province, this time focusing on gas processing and fractionation facilities.
Canadian crude output is rising, requiring new export routes. As traditional pathways face constraints, the U.S. Rockies—especially the Guernsey, WY hub—are emerging as key corridors for moving Canadian heavy crude to downstream markets, including the Gulf Coast.
There is cause for optimism that a number of smaller energy infrastructure projects entirely within Alberta’s borders will get built. A few years ago, when oil prices were much higher (and projected to remain high), oil sands producers committed to more than a dozen projects to expand bitumen output, these long-lead-time projects––which are adding about 850 Mb/d of production capacity in the 2015-19 period––are coming online. Most important to the midstream sector, these projects are driving the need for more diluent, either in the form of natural gasoline (a natural gas liquid––or NGL) or field condensate (superlight crude oil), as well as spurring development of oil and diluent pipelines, and of oil and diluent storage capacity. As we said last time, Alberta Energy Regulator (AER) has estimated that in-province demand for diluent will increase 200 Mb/d (from the current 550 Mb/d to 750 Mb/d) by 2021 as the oil sands expansion projects come online and ramp up to full production. Alberta’s current diluent needs are being met to a significant degree by out-of-province sources—almost all from the U.S., with the vast majority of the deliveries being made via Enbridge’s 180-Mb/d Southern Lights diluent pipeline from Manhattan, IL (south of Chicago) to Hardisty and Edmonton, AB, and via Kinder Morgan’s 95-Mb/d Cochin Pipeline from Kankakee, IL (also south of Chicago) to Fort Saskatchewan, AB (see Part 2 of our Parallel Lines series for more on Southern Lights and Cochin).
In the past year or two, though, Alberta gas producers have been focusing increasingly on “wet” gas and field condensate production in the province’s Montney and Duvernay plays. For example, about half of the production (on a barrel-of-oil-equivalent basis) from recently drilled Encana wells in the Duvernay has been in the form of natural gasoline or field condensate. In the Montney, Encana wells that started producing in 2016 get an average of 75 bbl of plant or field condensate for every MMcf of gas––seven times the condensate-to-gas ratio than in the company’s base/pre-2016 wells. By the end of 2016, Encana expects to be producing 50 Mb/d of condensate in the Montney alone.
Join Backstage Pass to Read Full Article
About the song
“Things Goin’ On” was a song on Southern rock group Lynyrd Skynyrd’s self-titled first album, whose phonetically helpful subtitle was (pronounced 'Lĕh-'nérd 'Skin-'nérd). The 1973 album also featured some of the band’s best-known songs, including “Free Bird”, “Simple Man” and “Tuesday’s Gone”.
