Four Sticks – Will More Pipeline Capacity Be Needed to Move Canadian Barrels from the Midcontinent to the Gulf Coast?

Crude oil production from the Western Canadian Sedimentary Basin (WCSB) continues to grow, and most of that growth is expected to be heavy crude oil, so pipeline companies are working on expanding capacity to move more of those barrels into the U.S. However, as most U.S. Midwest (PADD 2) refiners are already taking nearly as much WCSB heavy crude as they can, the incremental barrels coming into the U.S. will need to find their way to the Gulf Coast (PADD 3). A few projects are in the works that would move those barrels into PADD 2 waystation hubs such as Cushing, OK, and Patoka, IL, but will there be enough room on the four major pipelines — the Four Sticks noted in today’s title — that move barrels out of those two hubs to the Gulf Coast? That’s what we’ll look at in today’s RBN blog.

In Part 1 of our recent Turn Me Loose blog series we discussed the past drivers of WCSB crude oil production growth, which averaged about 170 Mb/d annually over the past 15 years, and grew by nearly 190 Mb/d last year, dwarfing WCSB demand growth that averaged 10-15 Mb/d annually. Our current forecasts are for a slower pace of production growth over the next five years — the major oil sands producers seem to be taking a wait-and-see approach while Canada’s federal and provincial governments negotiate new frameworks for greenhouse gas (GHG) emissions and abatements — but those plans will likely accelerate once policies have been clarified. The Alberta government wants the province’s oil production to double over time to around 8 MMb/d, and there’s plenty of resource to develop.

In Part 5, we looked at all the potential pipeline projects to move more barrels out of the WCSB, including about 980 Mb/d of new capacity into the U.S. that is either underway or proposed:

• Enbridge has defined plans to add about 430 Mb/d of capacity into the U.S. from its Mainline and Express systems and sees additional expansion potential.
• South Bow Corp. and Bridger Pipeline LLC have separate but apparently linked proposals for about 550 Mb/d of new capacity from Alberta to Guernsey, WY; from there, those barrels would need to move further downstream, to Cushing or elsewhere. (For more, see our 80+ page report Roundabout! Canada-To-Rockies Crude Flows Reshaping PADD 4 & Guernsey Market and subsequent webcast presentation.)

Additionally, more pipeline capacity to British Columbia on Canada’s west coast is in the works. The Canadian government is looking to expand capacity of the Trans Mountain Pipeline System — which added a new 590-Mb/d pipeline, the Trans Mountain Expansion (TMX), in 2024 — by another 300 Mb/d. Plans are to expand TMX by about 90 Mb/d using drag-reducing agents (DRAs) and another 210 Mb/d by adding pumping capacity and 19 miles of new pipeline. The Alberta and Canadian governments are also working to encourage private companies to build a greenfield pipeline from Alberta to the west coast. Recent history with TMX has shown that building new pipeline to the BC coast can be extremely time-consuming and expensive.

Enbridge is moving forward on three WCSB egress projects that involve its Mainline (yellow line in Figure 1 below) and Express-Platte (orange line) systems: its Mainline Optimization 1 (MLO1) and Southern Illinois Connector projects were sanctioned late last year, while Enbridge hopes to sanction its second Mainline Optimization project (MLO2) by midyear. These projects would collectively add 430 Mb/d of pipeline capacity from the WCSB into the U.S. Enbridge has already disclosed plans to increase volumes into Cushing by about 170 Mb/d (+100 Mb/d via an expansion of Flanagan South, purple line; +70 Mb/d by utilization of spare capacity on Spearhead, pink line) and increase volumes into Patoka by about 30 Mb/d (Express-Platte expansion and 56-mile extension to Patoka), but we suspect the remaining 230 Mb/d would need to make its way south to the Gulf Coast.