Parallel Lines - The Diluent Trail Across Canada Part 3 – Enbridge and Keyera in Edmonton

The Edmonton region in Alberta is home to a growing crude gathering hub that brings in bitumen crude from the oil sands region 250 miles to the north. In order to get that crude to Edmonton and to markets in the U.S., producers must first blend it with diluent range materials so that it can flow in pipelines. In the early days much of the diluent required in the oil sands was delivered by rail and truck but now a growing “parallel” pipeline network is developing to source and distribute supplies as new production comes online. Today we look at the Edmonton diluent distribution system.

This series details infrastructure delivering increasing quantities of diluent to production locations in Western Canada. The first episode (see The Diluent Trail Across Canada – Introduction) provided an overview of current and expected demand for diluent range materials for use by oil producers in the Western Canadian Sedimentary Basin (WCSB). Total Canadian demand for diluent in 2014 is expected to average 380 Mb/d – meaning that with 160 Mb/d of local supply about 220 Mb/d will be imported – mostly from the U.S. By 2019 that import requirement number could more than double to 485 Mb/d (assuming that Canadian domestic production doesn’t increase dramatically – which it might.). Episode Two covered the Southern Lights and Cochin pipeline diluent routes from the U.S. to Western Canada. Diluent distributed to the oil sands production regions comes from the two regional oil gathering storage and distribution hubs at Hardisty and Edmonton, Alberta. We will look at Hardisty – where producer Husky blends the Western Canadian Select crude blend, later in the series. This time we take a deeper dive into the diluent distribution network in Edmonton with a look at Enbridge and Keyera.

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Examines the impact of huge surpluses of natural gas bearing down on the Henry Hub in South Louisiana from Marcellus/Utica in the east and supplies from the west sourced from high-BTU and associated gas from plays in TX, NM, OK and ND

More information about Battle for Henry Hub here.

Enbridge Sherwood Park Terminal in Edmonton

As we described in Episode Two, the Enbridge Southern Lights diluent pipeline terminates at that company’s crude oil terminal west of Sherwood Park in Edmonton. This is the main origin terminal for Enbridge’s 1.4 MMb/d Mainline pipelines to Eastern Canada and the U.S. The satellite map in Figure #1 shows the Enbridge terminal at Sherwood Park surrounded by a cluster of midstream, producer and refining company facilities, including the Suncor refinery. Terminals in this Sherwood Park hub are connected by pipeline to a larger “Industrial Heartland” energy infrastructure hub 25 miles north of Edmonton at Fort Saskatchewan. Within and between these two hubs outside of Edmonton, incoming condensate from pipelines, truck and rail unload points is redistributed to outbound pipes serving the oil sands production region 250 miles to the north. The Edmonton hubs at Sherwood Park and Fort Saskatchewan are also the destination points for incoming bitumen crude from the production regions blended with diluent (dilbit). Most of that incoming dilbit is then shipped to refining markets in Eastern Canada and the U.S. by pipeline and increasingly by rail from new loading terminals in Edmonton.

Diluent material delivered into the Edmonton network is blended to meet a standard quality specification, known as Enbridge CRW condensate. The specification is maintained by a quality bank approach known as equalization. We have previously explained how quality banks work in the U.S. (see You Can’t Always Get Out What You Put In) and equalization is the Canadian flavor of these complex accounting systems. They work by setting a quality spec for inputs to a pipeline or storage system and rewarding participants that supply superior quality product while penalizing inferior supplies. One advantage of this common stream approach is that CRW condensate is “fungible” – a trading term meaning easy to transfer or trade between parties (nothing to do with fungus). CRW blend condensate is mostly consumed within Alberta as a diluent in heavy crude blending and is traded electronically between market participants for physical delivery via the ICE platform. Having a common “CRW” standard for condensate makes it easier for producers to get condensate and to know what they are getting from their suppliers. It also allows diluent materials from a number of different sources to be added to the blend stream – including natural gas liquids (NGL’s), condensate and other light hydrocarbons such as synthetic crude oil as well as the condensate imported into Canada on Southern Lights and Cochin.

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