Parallel Lines The Diluent Trail Across Canada – Part 8 Hardisty Diluent Supply

Most of the heavy crude oil arriving at the busy Hardisty hub in Alberta that throughputs up to 3.5 MMb/d – is already blended with diluent supplied closer to the production fields to the north. The diluent supply infrastructure to the oil sands today and planned for future expansion is primarily directed from Edmonton. But Hardisty fills an important role in final blending before the crude oil cocktail is transported to market. Today we round up our survey of Hardisty diluent requirements.

We start with a recap of the series so far, which reviews 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). If the recent crude price crash is sustained then it will likely impact investment decisions about future oil sands projects in a few years. . For the moment, however, any oil sands projects where the bulk of development is complete should continue into production since break-even values are relatively low after production starts.  Episode Two covered the Southern Lights and Cochin pipeline diluent routes from the U.S. to Western Canada. In Episode 3 we looked at the diluent distribution network in the two Edmonton hubs of Sherwood Park and Fort Saskatchewan, operated by Enbridge and Keyera respectively. In Episode 4 we looked at plans by midstream pipeline company Pembina to build a Canadian Diluent hub at Fort Saskatchewan fed primarily by growing local supplies from their Western Canadian gathering and processing system. In Episode 5 we described expanding diluent pipelines operated by Plains Midstream Canada and Inter Pipeline. In Episode 6 we described planned diluent pipelines out of Fort Saskatchewan proposed by TransCanada and Enbridge as well as the recent expansion of the Devon/MEG Energy 50/50 joint venture Access pipeline. Episode 7 looked at Husky Energy gathering systems into Hardisty.

Last time (Episode 7) we provided a summary of crude pipeline infrastructure in Hardisty - a tiny town in east-central Alberta that sits at a crossroads connecting crude oil gathering systems in Alberta and Saskatchewan to mainline pipelines that ship the crude to Eastern Canada and the US. Hardisty has 21 MMBbl of crude storage and as much as 3.5 MMBbl of oil passes through the town every day – a mixture of heavy crude blended with diluent and synthetic crude oil (SCO) upgraded at facilities such as Husky’s Lloydminster plant. In spite of all the heavy oil passing through, Hardisty does not supply a great deal of diluent back out to the Cold Lake and Athabasca oil sands fields to the north. That is because although these production fields need diluent – particularly those using the increasingly preferred SAGD production process – supplies are primarily delivered via Edmonton (as described in Episodes 4, 5 and 6).

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Aside from Husky there are seven pipeline gathering systems currently delivering crude into Hardisty as follows:

Enbridge Athabasca: the 570 Mb/d Athabasca pipeline (also known as Line 19) commenced service in 1999. The pipeline runs south from Enbridge’s Athabasca Terminal serving Suncor’s oil sands production (north of Fort McMurray) via the Cheecham and Kirby Lake terminals to the Enbridge Battle Creek terminal at Hardisty. The Athabasca Twin pipeline - currently being built by Enbridge between Kirby Lake and Hardisty - is expected in service in early 2015 with an initial capacity of 450 Mb/d potentially expandable to 800 Mb/d. The pipeline carries heavy blended crude oil with diluent supplied from Edmonton to Enbridge’s South Cheecham terminal.

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