Canadian pipeline projects for transporting oil sands crude are either getting cancelled or getting embroiled in litigation: Energy East Pipeline project met its demise recently; TransMountain Pipeline project is facing court cases. Thus, Alberta oil’s access to refinery in the East Coast (that imports foreign oil) and access to tide water for export to Asia and other countries have potentially got jeopardized.
With approval of Enbridge Line 67, some additional capacity, in the meantime, has become available for export of bitumen to USA. This should mitigate the situation regarding export of oil sands crude to USA for the foreseeable future. However, the Canadian oil sands crude oil should not remain confined/constrained to one market only – it desperately needs outlet for export to other countries too.
Outlook for oil
Oil will continue to be in demand for many more years to come, and oil price is expected to go up (and not down), well above $50/barrel, over the coming decades. In fact, global demand will start to pull away from global supply of crude oil from 2019 onwards primarily due to the impact of shelving and/or deferment of capex projects world over, including Alberta, in the aftermath of 2014 oil price plunge. Oil sands projects in Alberta got further whacked due to additional burdens of provincial and federal regulations introduced during and/or after 2015.
As US shale oil production plateaus around middle of next decade, as forecasted, demand for oil from other sources will get a further boost. Therefore, there is case to be made to continue to harness the nature’s endowment to Canada, i.e., oil sands. If oil sands industry of Canada does not provide additional oil to meet the growing global demand of the future, other sources in the world would fill the gap.
Alternative modes of transport of bitumen to East Coast and Asia/other countries
If availability of pipelines become a constraint, obviously, other modes of transport would need to be used and/or explored.
1) By rail: The oil sands companies are already using rail cars for transport of their crude. However, we all are familiar with the risks associated with this mode of transport (Lac-Mégantic incident of 2013 is still fresh in the memories).
2) In solid form: Another method was in the news recently, and that is, transportation of bitumen in solid form. Media reports suggested success had been achieved at lab scale in converting bitumen in to transportable solid form. Two methods are being touted in this regard: One, developed by University of Calgary and other of CN Railway.
Call for action regarding transportation of bitumen in solid form
Option of use of Port of Churchill for export of Alberta crude in solid form
A task force constituted by Government of Manitoba had recommended in 2013 to, inter alia, explore opportunity of shipping light sweet crude oil by rail to Churchill for export from areas without sufficient pipeline capacity through private sector partnerships with east-coast refiners and oil producers. This opportunity was subject to fully addressing all potential environmental risks to sensitive Arctic ecosystems.
The possibility of transporting bitumen in solid form would significantly minimize the risk of transporting bitumen to Port of Churchill and beyond – the risk that would have been associated with transporting it in liquid form. Thus, a synergy seems to be emerging between rail transport and technologies of transporting bitumen in solid form and Port of Churchill, Manitoba (other locations in Canada may be viable too, they should be identified as well).
If a pipeline to West Coast of Canada gets built, what happens to the investment made in developing the technology of transporting bitumen in solid form?
If a pipeline to West coast of Canada gets built, still the efforts and investment to scale up the technology for transportation of bitumen in solid form will not go waste – it will always be available should the pipeline capacity for export become inadequate or a pipeline gets out of commission for certain reasons. Also, it can be used in parallel for export of bitumen through Port of Churchill or any other suitable Canadian outlet.
Conclusion
Parth Mukherjee, P.Eng, PMP, MBA is a Speaker, Senior Project and Management Consultant & Advisor for Project Execution / Cost Reductions Strategies. He is Expert Principal at Center for Excellence in Project Execution, Calgary, Canada.