CERI: Oil sands growth would continue without pipelines

Preventing construction of the Keystone XL pipeline would not keep Alberta oil sands activity from growing, the president of the Canadian Energy Research Institute said. “There could be 50,000-200,000 b/d of rail capacity for bitumen if the pipeline isn’t built. That would slow down, but not stop, production,” Peter Howard indicated.

The outlook for constructing pipelines to export terminals on Canada’s west coast is mixed, he said in an Aug. 30 presentation at the Center for Strategic and International Studies. Opposition in British Columbia to Enbridge Inc.’s proposed Northern Gateway pipeline project is strong, particularly among coastal First Nations, Howard said.

Kinder Morgan Inc.’s proposal to add capacity to its already operating Trans-Mountain pipeline, which has operated since 1953, hasn’t raised concerns so far, he continued. A recent survey of Vancouver residents found 8 out of 10 didn’t even know crude oil and product exports were taking place there, according to Howard.

He added that there are oil sands projects which are economic that would not proceed if the four major export pipelines aren’t built. “There’s a proposal to take a TransCanada [Corp.] pipeline across Canada and into Ontario, where refineries are configured to handle heavy crude,” Howard said. “That would not work for Montreal area refineries which process sweeter grades.”

He said that tighter Canadian pipeline capacity also would slow down conventional oil development, which has rebounded since 2010 with wells being drilled horizontally in formations which were abandoned when vertically-drilled wells quit producing.

“We have massive deposits which were drilled in the 1960s where 18% of the oil in place was recovered,” Howard told OGJ following the seminar. “With horizontal drilling, that could rise to 30%.” Conversion of an existing pipeline to eastern Canada from natural gas to crude oil could provide 500,000-600,000 b/d of capacity, he said.

Contact Nick Snow at nicks@pennwell.com.

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