Quality Bank

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.

New pipelines are coming online to deliver increasing volumes of US and Canadian production to market. Producers want to be paid full value for the quality of the crude that leaves their wellhead. Yet many pipelines blend different shippers’ crude into a common stream. To compensate for any loss of value en route, pipelines operate quality banks. These systems calculate payments or debits for each shipper based on their input crude quality versus the common stream. Today we look at crude quality banks that determine value using refined products.

When you transport crude to market by pipeline its going to get mixed up with other folk’s production being shipped on that pipeline unless you have an exclusive pipeline – which is not the norm. Some pipeline systems use a batch mechanism to separate individual parcels but the usual approach is to mix together like crudes in a common stream. When that happens the pipeline operator uses a quality bank to credit or debit shippers for differences in the quality between the crude they put in and what they take out of the pipeline. Today we explore how quality banks work.