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He Ain't Heavy, He's My (Diluent), Part 2 - The Pipeline Networks that Source Diluent for the Oil Sands

The folks who transport bitumen from the Alberta oil sands to faraway markets depend on light hydrocarbons collectively known as diluent to help make highly viscous bitumen flowable enough to be run through pipelines or loaded into rail tank cars. The catch is — or was, we should say — that Western Canada wasn’t producing nearly enough condensate and other diluent to keep pace with fast-rising demand, so a few years ago, two pipelines from Alberta to the U.S. Midwest were repurposed to allow diluent to be piped north. More recently, though, Western Canadian production of diluent has been soaring and new pipeline capacity has been built within Alberta to deliver it to the oil sands. That has the potential to reduce the need for imports from the U.S. and may soon lead to at least one of the import pipes being repurposed yet again. Today, we continue our series on diluent with a review of the pipeline systems that collect locally produced light hydrocarbons that are eventually employed in the oil sands.

The production of bitumen, the very heavy oil that comes from Alberta’s oil sands, has undergone tremendous expansion in the past decade. While bitumen has become the workhorse of Canada’s oil supply growth, it poses a big challenge: bitumen’s extreme viscosity means that it needs help to allow it to flow in pipelines or be transported by rail. This is typically accomplished by blending diluent with bitumen to form a flowable mix called “dilbit” for transport by pipeline or, less frequently, “railbit” for loading into rail cars.

This is the second part of what will be a four-part series on diluent, demand for which has been rising steadily over the past decade along with bitumen production growth in the Alberta oil sands. In Part 1, we indicated that diluent demand in Western Canada has more than doubled over the past decade, from about 300 Mb/d in 2010 to about 750 Mb/d in the first four months of 2020. Demand would have been even higher this year if it weren’t for curtailments in bitumen production tied to recent very low heavy oil prices and COVID-19. An increasing share of that demand is being met by diluent supply from Western Canada production, though the oil sands still depend to a significant degree on pipeline imports of diluent from the U.S.

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