Edmonton

In May 2019, the first-ever propane unit train from the Bakken to Mexico reached its destination, and since then, three more of these 100-car, single-commodity “bulk” trains have made the same trip. Facilitating these shipments by Twin Eagle Liquids Marketing is Marathon Petroleum Corp.’s (MPC) unit train-loading terminal in Fryburg, ND, which was initially set up to load crude oil but was recently expanded to handle propane too. And soon, the terminal in Torreón, Mexico, that has been receiving these unit trains will have a new loop track too, enabling producers and marketers to take full advantage of the bulk transport option. Today, we look at the economics and challenges of this relatively new propane export route.

In May 2019, Twin Eagle Liquids Marketing shipped a 100-car train filled with propane from North Dakota to Mexico, marking the first-ever single-commodity train — i.e. “unit train” — between the Bakken and the U.S.’s southern neighbor. As it turns out, it was also the first of what appears to be a regularly scheduled run to Mexico. Since May, three more unit trains have made the journey south from the Bakken’s first unit train terminal for propane. Rail shipments of propane to Mexico as part of mixed-goods trains aren’t new, but figuring out how to economically ship large quantities of propane via unit trains has long evaded NGL marketers and producers — that is, until now. What are the economics and other factors that finally made it possible, and what are the prospects and challenges ahead for unit-train exports to Mexico? Today, we look at how the first all-propane train to Mexico came to pass and what the outlook might be for these shipments to continue.

Offer any energy commodity at a low-enough price and buyers will surface, as long as there’s a way to get that liquid or gas from where it’s being sold to where it’s being used or put on a boat for export. That’s been the recent experience of the butane market in Western Canada, where a perfect storm of events last fall caused butane prices in Edmonton, AB, to freefall to near zero. But things have turned around, at least for now. Today, we take a look at the dramatic recovery of the Edmonton butane market and what might lie ahead.

What a deal! Take as much butane as you want — all for the low, low price of less than 10 cents/gallon (c/gal). That was the situation in Edmonton, AB, last November and the price stayed dirt cheap until a few days ago. Given a decline in demand for butane in crude blending, along with growing NGL production, the NGL processing and storage hub in Western Canada was awash in butane as winter approached. It remains flush with product today — and the price for Alberta butane is still low. How did this happen, and how will it play out over the next few months? Today, we examine the factors that led the Edmonton NGL market to see a price fall to near zero c/gal for the second time this decade.

Yesterday (June 2, 2015) spot prices for propane at Edmonton, Alberta were assessed by OPIS at an average of -0.625 cnts/gal (-26.25 cnts/Bbl). Yes you read correctly – the price was negative – meaning that producers will PAY YOU to take their propane away in Edmonton. Prices at Edmonton have been below zero before at least twice in the past 2 weeks and they averaged just 2.4 cnts/gal during May. Propane has fallen on hard times in the U.S. as well with Mont Belvieu Gulf Coast trading hub prices reaching13 year lows under 33 cnts/gal last week (back up to 44 cnts/gal yesterday) and the ratio of propane prices to U.S. benchmark West Texas Intermediate (WTI) crude hitting an all time low under 24%. Today we begin a new series on propane with a look at the Edmonton market.

Since we began this series on diluent supplies to Canada (used to blend with heavy oil to facilitate pipeline shipment), questions about diluent supply have been overshadowed by the bigger concern with falling crude prices. Right now, oil sands producers are probably more concerned with understanding the economics of their expansion projects and whether to go ahead with new oil sands development programs than with securing diluent supplies. Nevertheless, falling diluent costs in Edmonton have provided some relief to existing producers. Today we look at how improving diluent supplies and better prices for Canadian crudes have reduced diluent costs.

Hardisty is the main export hub for Western Canadian crude travelling to market in Eastern Canada or the U.S. That role will expand when (and if) the TransCanada Keystone XL and Energy East pipeline projects are completed. With 3.5 MMb/d of mostly heavy crude passing through, you might expect Hardisty terminals to require significant volumes of diluent. But in fact only one outbound diluent pipeline serves Hardisty region gathering systems. Today we explain why Hardisty requires less diluent.

Between them the TransCanada Grand Rapids, Enbridge Norlite and Devon/MEG Access pipelines currently being planned and built out will be able to deliver an extra 1 MMb/d of diluent to oil sands producers by 2017. That’s more than producers currently expect to need until 2030. The diluent will be shipped north from Edmonton terminals to production plants and blended with bitumen before making the return trip as dilbit or railbit destined for long-haul transport by pipe or rail to U.S. and Canadian markets. Today we describe the pipeline build out plans.

Last winter a Midwest propane shortage of epic proportions caused prices at the Conway, KS trading hub to spike over $4/Gal in January 2014 (nearly twice the price of crude oil at the time). The shortage was caused by a perfect storm of events starting with high propane demand from farmers for crop drying in the late fall and ending with record retail and commercial heating demand during the Polar Vortex cold weather in January. The high demand was compounded by the partial closure of the Kinder Morgan Cochin pipeline supplying propane to the Midwest from Western Canada and a temporary shutdown of the Hess Tioga fractionation plant in North Dakota, not to mention booming Gulf Coast propane exports reducing domestic availability. This year the Midwest propane market appears to be much better supplied in spite of the loss of the Cochin pipeline that has now been reversed to carry diluent to Canada. Prices should therefore be less volatile than last year – unless Mother Nature throws another icy winter curve ball. Today we look Midwest propane prices and supply this year.

With Western Canadian oil sands bitumen output increasing rapidly, producers need more diluent to blend with their production so that it can flow to market in pipelines. That means delivering diluent to remote locations as far as 250 miles northwest of Edmonton. Smaller oil sands projects typically get their diluent delivered by rail or truck but pipeline infrastructure is being built out for larger projects as their production comes online. Inter Pipeline (IPL) diluent delivery volumes on their Polaris pipeline at the end of 2013 were just 20 Mb/d. By 2017 that volume could be to 1.2 MMb/d. Today we detail IPL and Plains build out plans.