In May of this year, Western Canada’s oil production shut-ins due to weak demand and poor pricing were estimated to have peaked near 1 MMb/d, resulting in a 20% drop from the near-record production levels reached only a few months earlier. The magnitude of the production fall in such a short period of time caused a significant drop in the utilization of pipelines that transport crude oil from Alberta to other parts of Canada and the U.S. All of a sudden, pipelines that had been heavily rationing their capacity over the past couple of years to accommodate steadily rising production suddenly had ample spare capacity. With those supplies now on the road to recovery, pipelines have begun to fill some of that extra space and are moving toward rationing capacity once again. Today, we continue our review of Western Canadian production and takeaway capacity with a look at how this spring’s production cuts affected the region’s biggest pipelines.
The saga of the crude oil pipelines that transport Canada’s production to market has had many twists and turns. With increasing supplies the past few years outstripping available pipeline capacity, a number of large capacity expansions have been proposed, but they have been frequently stymied by regulatory and legal roadblocks on both sides of the U.S./Canada border. We have blogged many times about these pipelines’ trials and tribulations, most recently in The Shape I’m In, How Long and Canadian Pipedream. Some progress is being made in adding new pipeline capacity, but only in small fits and starts, and it remains well below the levels needed to move all oil supplies to market by pipe.
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.
The end result of this has been too many barrels competing for too little pipeline capacity. Winners and losers in this competition are determined in a process known as apportionment. Under apportionment, a shipper’s monthly nominated supplies for a given pipeline are reduced by the pipeline operator so that it can accommodate all shippers’ requests. (See Maybe It’s Time for a more detailed explanation of apportionment.) Apportionment had become such a standard part of the Canadian oil pipeline landscape in the past few years that it no longer generated surprise when shippers were having their nominated volumes reduced by 50% or more in some months.
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About the song
"Never Say Goodbye" was written by Jon Bon Jovi and Richie Sambora and appears as the ninth song on Bon Jovi’s third studio album, Slippery When Wet. Released as a single outside the U.S. in June 1987, the song still went to #11 on the Billboard Rock Tracks chart and #28 on the Hot 100 Airplay Survey. Personnel on the record were: Jon Bon Jovi (lead vocals, rhythm guitar), Richie Sambora (lead guitar, backing vocals), Alec John Such (bass, backing vocals), Tico Torres (drums, percussion), and David Bryan (keyboards, backing vocals).
Slippery When Wet was recorded at Little Mountain Sound Studios in Vancouver, BC, with Bruce Fairbairn producing. The album was released in August 1986 and went to #1 on the Billboard Top 200 Albums chart. It has been certified 12x Platinum by the Recording Industry Association of America. Four singles were released from the album.
Bon Jovi is an American rock band formed in Sayreville, NJ, in 1983 by Jon Bon Jovi, Richie Sambora, David Bryan, Tico Torres, and Alec John Such. Such was replaced by Hugh McDonald in 1994 and Sambora by Phil X in 2013. Bon Jovi has released 15 studio albums, three live albums, five compilation albums, five EPs, and 66 singles. The band has sold over 130 million records worldwide, and has won two American Music Awards, one Billboard Music Award, one Brit Award, one Grammy Award, two MTV Video Music Awards, and two World Music Awards. Bon Jovi was inducted into the Rock and Roll Hall of Fame in 2018. The band has completed a new album, but the release date and touring plans are on hold due to COVID.
