Edmonton & Hardisty – Storing Crude Oil in Harmony – Kinder, Keyera, Genesis, Enbridge and Pembina Expansions

Midstream companies are expanding their infrastructure in Edmonton, Alberta. Kinder Morgan is adding over 5 MMBbl of storage at the origin terminal for its Trans Mountain pipeline to the West Coast. However new investment is also being piled into rail infrastructure – including Kinder’s JV unit train loading terminal with Keyera. Canadian producers are shopping for routes to market that offer them optionality that can help mitigate congestion and discounting.  Today we describe five company’s infrastructure plans in the Edmonton region.

Recap

This is Part 4 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 Part 3 we looked at TransCanada and MEG Energy’s Edmonton storage expansion plans. This time we review Kinder Morgan, Kayera, Genesis Energy, Enbridge and Pembina’s growth projects.

Kinder Morgan Edmonton Terminal

The Kinder Morgan Edmonton Terminal is located in Sherwood Park, Alberta, east of Edmonton. The terminal provides receipt and delivery storage for shippers on the 300 Mb/d Trans Mountain (TMX) pipeline system from Edmonton to the Canadian West Coast. The terminal has 20 incoming feeder lines from throughout Alberta, is the origin of the TMX pipeline and also has a connection to the Enbridge Mainline. Kinder is waiting for permitting on a major expansion of TMX to 890 Mb/d (see West Coast Pipe Dreams). If approved, construction on the expanded pipeline could begin in 2016 with service by 2017.

Prior to this year (2013) storage at the terminal was housed in 19 tanks providing operational service for TMX with 2.5 MMBbl of crude capacity. During 2013 and into 2014 Kinder Morgan is expanding the terminal by adding 5.35 MMBbl of new storage capacity for merchant use by third parties. The new storage will help alleviate congestion at the Edmonton end of TMX that is regularly apportioned because it is oversubscribed by shippers. According to our friends at Genscape, the Kinder storage expansions consist of seven 400MBbl, six 300 MBbl, two 250 MBbl, and one 220 MBbl tank. All tanks are expected to be ready for service in October 2014.

Kinder Morgan also operates the adjacent North Forty terminal at Edmonton that provides 2.1 MMBbl of merchant crude oil storage as well as blending services. Once the Edmonton Terminal Expansion project is complete, Kinder Morgan will have close to 10 MMBbl of storage in Edmonton.

Keyera and Kinder Morgan Alberta Crude Terminal

On July 30, 2013 Keyera Corp. and Kinder Morgan announced a 50-50 joint venture to build a crude oil rail loading facility in Edmonton called the Alberta Crude Terminal (ACT).  When complete, the terminal will be able to accept crude oil streams from Kinder Morgan's Edmonton Terminal for loading and delivery via rail to refineries throughout North America. The ACT will be constructed next to Keyera's Alberta Diluent Terminal and will be operated by Keyera (see map below). The rail facility will be capable of loading approximately 40 Mb/d of crude onto unit trains and will be served by both Canadian National (CN) and Canadian Pacific (CP) railroads.

Source: Keyera Investor Presentation (Click to Enlarge)

Kinder and Keyera will modify their respective Edmonton terminals to connect crude supplies to ACT.  Kinder will construct a 16-inch pipeline to connect its North 40 Edmonton Terminal to Keyera's Edmonton Terminal.  Keyera will construct a 16-inch crude oil pipeline across its Edmonton Terminal to the existing Alberta Diluent Terminal connector pipeline and install additional pumping capacity. The rail terminal will initially ship dilbit crude – heavy oil sands bitumen diluted with lighter hydrocarbon diluent (see Heat It Part 1 and Part 2 for more on the diluent issue for Canadian bitumen crude-by-rail). Kinder and Keyera may install a diluent recovery unit (DRU) in the future that would remove diluent from the crude to reduce rail shipping costs (see Go Your Own Way). [Note that in early December 2013, a rival crude-by-rail loading terminal project operated by Canexus at Bruderheim announced they would build the first DRU at a cost of $70 million.]

ACT commissioning is targeted for the second quarter of 2014, assuming receipt of regulatory approvals. The expected cost of the terminal is $98 Million with Keyera paying two thirds and Kinder Morgan one third. The terminal construction is underpinned by a 5-year agreement with a major refiner. Kinder and Keyera are evaluating expanding crude loading capacity to 125 Mb/d.