Expanding Western Canadian Oil Sands production is currently butting up against pipeline constraints to move the crude to markets in the US and beyond. The result is painful price discounts for producers and an increased inventory of crude in storage at the Edmonton and Hardisty hubs in Alberta. New storage capacity is being added in both hubs to handle the growing volume. Today we detail TransCanada and MEG Energy expansion plans in Edmonton.
This is Part 3 of our series on Canadian crude oil storage. In Part 1 we looked at increasing Canadian crude oil production and expanding pipeline capacity in the two crude marketing hubs of Edmonton and Hardisty. These hubs are the staging posts for crude oil exports to the US as well as the distribution point for diluent supplies coming into the oil sands production region. In Part 2 we turned our attention to the relationship between Canadian crude pricing, congestion on the crude pipelines leaving Edmonton and Hardisty, and storage inventory. The growth and use of storage capacity at Edmonton and Hardisty bears a strong relationship to price discounts that Canadian producers have had to swallow as a result of pipeline congestion. In this episode we look at expanding storage plans at Edmonton.
TransCanada
TransCanada is one of the leading energy infrastructure companies in North America with significant oil and natural gas pipeline assets. In addition to the existing and proposed Keystone crude oil pipelines from Hardisty to the US Midwest, TransCanada is also the operator of the proposed Energy East pipeline that would convert part of its giant natural gas pipeline from Alberta to Eastern Canada (see What Becomes of the Empty Pipelines Part 1 and Part 2 for more on the Energy East project). Although TransCanada has over 1 MMBbl of storage at Hardisty with plans to increase that by a further 3 MMBbl (we’ll cover those plans in a subsequent episode in this series) the company does not currently have significant storage assets in or near Edmonton. That is one reason why, earlier this year, TransCanada announced its proposed Heartland Pipeline and TC Terminals Project. The project has two parts – a tank storage facility located in Alberta’s Industrial Heartland area that is 25 miles Northeast of Edmonton and a 125-mile pipeline connecting the Edmonton region to facilities in Hardisty (see map below).
Source: TransCanada (Click to Enlarge)
TransCanada anticipates the pipeline could ultimately transport up to 900Mb/d. The TC terminals will include 1.9 MMBbl of crude tank storage made up of four 350 MBbl and two 250 MBbl tanks. The projects have a combined cost estimated at $900 million. Pending regulatory approvals, construction for this project is planned for the spring of 2014, with an in-service date in the second half of 2015. The TC terminals will link crude oil production in the Edmonton area directly to Hardisty and TransCanada pipelines to the US and Eastern Canada. The terminal will also be linked to the Grand Rapids pipeline (see Edmonton and Hardisty Part 1) that will supply diluent to the oil sands production regions.
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