Category Archives: Oil Sands

Enbridge gets nod for Alberta pipeline

CALGARY, Alberta, Nov. 26 (UPI) — Canadian pipeline company Enbridge announced it reached an agreement with shippers for the expansion of an oil pipeline in Alberta province.

Enbridge said it agreed to terms for a $1.8 billion expansion to its pipeline system between Edmonton and Hardisty, Alberta. The expansion envisions a 2015 capacity target of 800,000 barrels per day.

The company said the new line agreements would fall within its competitive toll agreement and include a 25 cent surcharge on shipments.

“The agreement with shippers on terms for the expansion continues our collaborative relationship, ensuring that we provide the facilities and services they need to maximize the value of their crude oil,” Stephen Wuori, president of liquid pipelines for Enbridge, said in a statement.

Enbridge aims to build the twin Northern Gateway pipeline from oil sands operations in Alberta to ports along Canada’s west coast. Critics of tar sands oil, the type of crude found in Alberta, say there are concerns about the environmental consequences associated with pipeline developments.

Enbridge said the Edmonton to Hardisty line should begin construction by 2014 once it gets full support from the government.

SOURCE: http://www.upi.com/Business_News/Energy-Resources/2012/11/26/Enbridge-gets-nod-for-Alberta-pipeline/UPI-47511353934923/#ixzz2DLctvybr

Sunshine Oilsands Plans $3.5 Billion in Capital Investment

China-backed Sunshine Oilsands Ltd. has budgeted about US$3.5 billion for capital investment in its Canadian oil-sands projects at a time when investors are on edge about the investment climate in energy-rich Canada.

The Calgary-based energy company’s projects are still in a preliminary stage, but it is aiming for its first production in the fourth quarter of 2013, with output of 5,000 barrels a day by mid-2014, Co-Chairman Shen Songning said in an interview.

Mr. Shen’s optimism about the projects—based in Athabasca Sands, Alberta—comes at a tense time for Chinese and other foreign investors hoping to capitalize on Canada’s huge reserves of oil and natural gas, much of which are expensive to extract as they are trapped in oil-sands deposits or in shale-rock formations.

Last month, the Canadian government turned down a US$5.18 billion bid by Malaysia’s state-run Petroliam Nasional Bhd., or Petronas, to acquire Canada’s Progress Energy Corp. The bid isn’t dead, however, as the two sides have agreed to resume talks on the purchase.

Next week, the government is expected to rule on the US$15.1 billion purchase of Canada’s Nexen Inc. NXY.T +0.78% by China’s Cnooc Ltd. 0883.HK +1.24%

The two deals are a litmus test for Canada’s aspirations to develop its oil and gas reserves and find new export markets at a time when its main buyer, the U.S., is cutting energy imports due to the success of shale projects there.

“Conventional oil supply is in demand and global production is expected to transition toward unconventional sources,” said Mr. Shen. “We see Canada’s oil sands playing a major role in meeting the needs of the world’s growing crude demand.”

Oil sands—a mix of sand and tarlike ultraheavy crude oil called bitumen—are costly to refine, but higher crude prices in recent years have made production from oil sands more feasible. Canada’s oil sands will likely account for 4.4% of global crude-oil output by 2035, up from 1.6% in 2009, the International Energy Agency has said.

Mr. Shen said the US$3.5 billion expenditure will be funded by cash flow from existing projects and potential energy joint ventures, as well as bank loans and proceeds from Sunshine Oilsands’ Hong Kong initial public offering in March. Possible joint-venture investors include China sovereign-wealth fund China Investment Corp. and China oil company China Petrochemical Corp., also known as Sinopec Group.

The company’s oil-sands projects can achieve positive cash flow per barrel when West Texas Intermediate prices are above US$50 a barrel, Mr. Shen said.

“We see oil prices hovering around US$100 a barrel over the next three to five years as demand for oil is rising on the back of strong economic growth in Asia,” he said. He didn’t specify whether he was referring to benchmark West Texas Intermediate or Brent crude.

He also said the company’s operations could benefit from falling natural-gas prices, because fuel costs account for 20% of Sunshine Oilsands’ total production expenses.

Sunshine Oilsands, which raised $579 million from the Hong Kong IPO, is planning a secondary listing in Toronto in the fourth quarter to increase shareholder value. The company’s share price has fallen 46% in Hong Kong since the stock’s debut.

“Our current share prices are extremely undervalued,” Mr. Shen said, adding the company’s net asset value per share is at 21.40 Hong Kong dollars (US$2.76). Shares in Sunshine Oilsands closed at HK$2.62 on Thursday.

In response to the decline in its share price, Sunshine Oilsands recently announced a $50 million share-repurchase program.

SOURCE: http://online.wsj.com/article/SB10001424052970204712904578092052566429508.html

Keystone XL pipeline concerns are being addressed

A state agency has issued its preliminary review of the Keystone XL pipeline that appears to indicate most concerns are being addressed.

The draft evaluation report, released Tuesday afternoon by the Nebraska Department of Environmental Quality, concluded that the new route of the controversial crude-oil pipeline successfully avoids the Sand Hills region of Nebraska, a step agreed to during a special session of the Legislature last year.

The report also stated that pipeline developer TransCanada Inc. had, by making some minor changes to the pipeline route in August, addressed concerns raised by the agency about crossing areas of sandy soils or areas near municipal drinking-water supplies of two small communities, Clarks and Western.

The agency also said TransCanada has agreed to compile an emergency response plan for leaks that might occur in the 36-inch, high-pressure pipeline, and buy $200 million in third-party liability insurance policy to cover any clean-up costs.

The company has provided the state with a chemical makeup of several forms of crude oil that will be shipped through the pipeline, which will carry 30 million gallons of oil a day. The exact composition of the oil, the agency said, will be made immediately available in the event of a leak.

Environmental groups, including Bold Nebraska and the Sierra Club, have raised concerns about the lack of information about the chemical makeup of diluted bitumen that will be carried by the pipeline.

While Tuesday’s draft report doesn’t raise “concerns” like those this summer about sandy soils and drinking-water wells in the path of the pipeline, he said it does “point out the impacts on different kinds of terrain” that will be crossed by the pipeline.

A public hearing on the draft report will be held at 6 p.m. on Dec. 4 at the Boone County Fairgrounds in Albion, Neb. Linder encouraged the public to comment on the report, either at the meeting or by mail or email.

A final report will be issued after the hearing. Gov. Dave Heineman will have the final say on whether the state approves the pipeline’s route across Nebraska.

That decision will be forwarded to the U.S. Department of State, which will make the final judgment on whether the entire Keystone XL project will be allowed. The project will transport oil from Canada’s tar sands region to the U.S. Gulf Coast, and pick up some oil from North Dakota and Montana along the way.

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TransCanada gets Keystone XL win in Texas

A state judge in Texas ruled that Canadian pipeline company TransCanada can move ahead with pipeline construction in the south of the state.

TransCanada aims to build its Keystone XL pipeline to carry oil derived from oil sands operations in Alberta. Part of the U.S. section of the project would move crude oil across southeastern Texas to refineries along the southern coast.

Texas landowners sued TransCanada, saying property easement bonds weren’t posted according to the letter of the law. The company, however, increased the size of the bonds meant to cover potential damage and a judge gave the company consent to move forward in Texas.

“The statutory requirements for the issuance of writs of possession are now met,” Jefferson County Court at Law Judge Tom Rugg was quoted by Bloomberg News as saying.

TransCanada in July received the last of three permits needed from the U.S. Army Corps of Engineers to advance its 485-mile Gulf Coast Project, the domestic leg of Keystone XL.

The Gulf Coast Project will stretch from Cushing, Okla., to southern Texas. Another 47-mile project would transport oil to refineries in Houston.

SOURCE: http://www.upi.com/Business_News/Energy-Resources/2012/10/01/TransCanada-gets-Keystone-XL-win-in-Texas/UPI-88011349093527/

Enbridge receives approval for Woodland Pipeline Extension Project

Enbridge Pipelines Woodland Inc., an affiliate of Enbridge Inc., has received approval from the Alberta Energy Resources Conservation Board to construct the Woodland Pipeline Extension Project.

The project will involve construction of a 36 inch diameter line approximately 385 km from Enbridge’s Cheecham regional oil sands terminal to its mainline hub terminal at Edmonton, effectively twinning Enbridge’s existing Waupisoo Pipeline. The project is estimated to require an investment of approximately $1.0 to $1.4 billion for an initial capacity of 400,000 barrels per day (bpd), expandable to 800,000 bpd.

The new line is committed to accommodate anticipated growth in production from the Kearl oil sands project, and is required for expected needs from other projects already connected to Enbridge’s regional oil sands system, or expected to be connected.

The commercial terms are likely to parallel those of the base Woodland Pipeline. Enbridge has not yet received final commercial approval to initiate field construction from shippers, but anticipates it will do so in time to achieve a 2015 in-service date. Pre-construction development costs are being backstopped by shippers pending final commercial approval.

SOURCE: http://www.equities.com/news/headline-story?dt=2012-09-28&val=534513&cat=energy

Williams signs gas processing deal in Canada Oil Sands

(Reuters) – U.S. energy infrastructure company Williams (WMB.N) said on Wednesday it has signed a long-term gas processing agreement with a producer in the Canadian oil sands.

Under the deal, Williams will extract, transport, fractionate, own and market natural gas liquids (NGLs) and olefins from the producer’s upgrader near Fort McMurray, Alberta.

Williams said it expects to recover about 12,000 barrels per day (bpd) by mid-2015, growing to 15,000 bpd by 2018.

The Tulsa, Oklahoma-based company did not name the Canadian oil sands producer in its press release and a spokesman was not immediately available for comment.

Propane recovered will be sold into the local market and would potentially be used as feedstock at Williams’ proposed propane dehydrogenation facility in Canada. The other products will be sold into the established markets where Williams sells existing NGLs and olefins produced in Canada.

Williams said it plans to build a new liquids extraction plant and supporting facilities at the oil sands producer’s upgrader. It also plans to extend its Boreal Pipeline to transport the NGL/olefins mixture to its expanded Redwater facility near Edmonton.

The total capital expenditure for the project is expected to be C$500 million to C$600 million, the company said.

SOURCE: http://www.reuters.com/article/2012/09/26/us-williams-canada-idUSBRE88P0VS20120926

Gateway pipeline hearings resume: First Nations get chance to question Enbridge

EDMONTON – Lawyers for an aboriginal group fighting the proposed Northern Gateway pipeline have raised more questions about who could end up with ownership stakes.

Hana Boye, who represents the Haisla band which claims much of the pipeline’s route as its traditional territory, queried Enbridge (TSX:ENB) officials on who put up money for 10 $10-million option agreements that could guarantee their holders space in the pipeline and a share of its ownership.

“If we don’t know who these investors are, we’re not able to determine if they’re financially viable, if they’re market-force driven or if it’s in the interest of Canadians,” she said.

Lawyers for environmental groups had already raised questions at hearings earlier this month about the possibility of Chinese interests buying control of the project.

On Monday, Enbridge vice-president John Fisher said most of the purchasers have been identified. Those who aren’t are covered by a confidentiality agreement, he said.

Under further questioning, Fisher conceded that the Chinese state-owned oil company Sinopec owns one of the $10-million units.

Boye then asked if the purchasers of the other units would be able to sell them and whether Enbridge would have any influence on who would be able to buy them.

“It would be a private transaction between those two parties,” Fisher said. “It could happen.”

Boye pointed out that Chinese energy firms are buying Canadian companies who have purchased option units. The China National Offshore Oil Corp. has purchased a share of MEG Energy, which is an option owner. As well, Chinese interests are also trying to buy Nexen (TSX:NXY), which owns another one of the 10 options.

The testimony came as hearings on Enbridge’s controversial pipeline resumed in Edmonton. It was the first chance for First Nations representatives to cross-examine company officials about the proposed $6-billion line.

Haida and Haisla officials have made statements voicing concerns about the project at earlier hearing sessions.

The pipeline would carry bitumen from Alberta’s oilsands to the B.C. coast where it would be loaded onto tankers headed for Asia.

People living along the route and on the B.C. coast fear the impact of possible spills, but supporters of the pipeline argue it’s needed to expand Canada’s export options.

The latest round of hearings in Edmonton are to last all week.

SOURCE: http://www.firstperspective.ca/news/1859-gateway-pipeline-hearings-resume-first-nations-get-chance-to-question-enbridge

TransCanada proposes new Keystone XL route in Nebraska

WASHINGTON, Sept 5 (Via Reuters) – The company planning to build the Keystone XL tar sands pipeline from Canada to Texas said on Wednesday it has submitted a new route for the project that will avoid sensitive ecological areas in Nebraska.

TransCanada Corp said the pipeline will avoid the Sandhills, a region of prairie and sand dunes that is rich in plants and wildlife, with thousands of ponds and lakes.

President Barack Obama delayed a decision on the pipeline earlier this year, citing concerns about the northern portion of the route near a major aquifer and the Sandhills in Nebraska.

TransCanada has been working with Nebraska officials to come up with a new route and it hopes to have U.S. State Department approval for the northern section early next year.

“Based on feedback from the Nebraska Department of Environmental Quality and the public, we have refined our proposed routing,” Russ Girling, TransCanada’s president and chief executive officer, said in the release.

The alternative route submitted in an environmental report to Nebraska on Wednesday was developed “based on extensive feedback from Nebraskans, and reflects our shared desire to minimize the disturbance of land and sensitive resources in the state,” said Girling.

A Nebraska public affairs official said he expected the state to publish maps of the new route on its website later on Wednesday.

An environmentalist said she would withhold comment on the new route until she had seen a map of the project.

A public affairs official with the Nebraska Department of Environmental Quality said he expected the state to publish maps of the new route on its website later on Wednesday.

Construction on the 700,000 barrels per day southern part of the line, renamed the Gulf Coast project, has already begun after Obama gave his support for that section.

The Gulf Coast project will drain a glut of crude in the U.S. midsection fed mostly by the oil boom in North Dakota.

The northern section of the line needs approval from the State Department because it crosses the national border.

SOURCE: http://in.reuters.com/article/2012/09/05/pipeline-keystone-route-idINL2E8K56YB20120905

NTSB blame multiple corrosion cracks & ‘weak’ regulations – Kalamazoo Oil Spill

The National Transportation Safety Board blamed multiple corrosion cracks and “pervasive organizational failures” at the Calgary-based Enbridge pipeline company for a more-than-20,000-barrel oil spill two years ago near Michigan’s Kalamazoo River.

The cost of the spill has reached $800 million and is rising, the NTSB said, making the pipeline rupture the most expensive on-shore oil spill in U.S. history. The pipeline’s contents — heavy crude oil from Canada’s oil sands — have made the spill a closely watched case with implications for other pipelines carrying such crude.

The NTSB also blamed “weak federal regulations” by the Pipeline and Hazardous Materials Safety Administration for the accident, which spilled at least 843,444 gallons of oil into a tributary of the Kalamazoo in Marshall, Mich. The oil spread into a 40-mile stretch of the Kalamazoo and a nearby wetlands area.

“This accident is a wake-up call to the industry, the regulator, and the public,” NTSB Chairman Deborah A.P. Hersman said in a statement.  She added that “for the regulator to delegate too much authority to the regulated to assess their own system risks and correct them is tantamount to the fox guarding the hen house.”

The spill began about 5:58 p.m. on July 25, 2010, when a 30-inch diameter pipeline ruptured. Twice, Enbridge workers tried to restart the pipeline after alarms about abnormal pressure in the line and 81 percent of the oil spilled over 17 hours after those alarms, the NTSB said.

“We believe that the experienced personnel involved in the decisions made at the time of the release were trying to do the right thing,” Enbridge’s chief executive, Patrick D. Daniel, said.“As with most such incidents, a series of unfortunate events and circumstances resulted in an outcome no one wanted.”

The case is being scrutinized by industry and environmental groups because it could threaten plans to build new pipelines to carry crude from Canada’s oil sands, or tar sands, into the United States. TransCanada’s controversial Keystone XL pipeline is one of the plans awaiting approval.

The NTSB, part of the Transportation Department, said the Enbridge pipeline break “was the result of multiple small corrosion-fatigue cracks that over time grew in size and linked together, creating a gaping breach in the pipe measuring over 80 inches long.”

SOURCE: http://www.washingtonpost.com/business/economy/ntsb-blames-enbridge-weak-regulations-in-kalamazoo-oil-spill/2012/07/10/gJQAWzqgbW_story.html

Alberta’s big small-pipe problem

They are the little brothers and sisters of the pipeline world. Some are barely large enough to jam a hand into, but they do the dirtiest work in the energy business, ferrying great volumes of raw oil and gas from wells to processing plants.

And though they are small, they often carry large risk, an issue of mounting concern in Alberta, a province that has seen a series of spills train a global spotlight on pipeline safety.

These smaller pipes can often be overlooked, next to the big ones that garner attention when they rupture into the Kalamazoo River — an accident that cost Enbridge Inc. a historic $3.7-million (US) fine this week, on top of $725 million in cleanup costs — or at an Alberta pumping station where the company recently had another large spill.

But in Alberta, the pipe is almost all small. Some 327,000 kilometres of pipe that is eight inches and smaller in diameter spread across the province like a network of veins. It is roughly 90 percent of all pipe in the province, a vast web of steel that is uniquely vulnerable to problems, and uniquely difficult to both oversee and maintain.

In large measure, that’s because the stuff those pipes carry is often nasty: impure, unprocessed energy laced with hydrogen sulphide and water and sand, each of which can inflict damage on buried steel. Construction methods of smaller pipes mean they often can’t be monitored and inspected using the best tools. Some of the junior and mid-sized oil and gas companies that run them don’t have the large dedicated inspection teams employed by larger pipeline operators.

Alberta’s energy regulator says problems on small pipes often lead to small spills, dampening the need for concern.

Alberta’s oil and gas regulator, the Energy Resources Conservation Board (ERCB), noted in a 2007 report that “most of Alberta’s pipeline infrastructure is used for the production of raw oil and gas, which by nature can be highly corrosive.” It said corrosion has been growing as a problem — from 63 percent of all leaks and ruptures in a 1998 report to 70 per cent less than a decade later.

And though overall accidents have been declining, last year Alberta saw 1.5 failures per 1,000 kilometres of pipe — or nearly 500 on its length of small lines. That’s down from an average in previous years of 3.5. Many of those spills are small — all leaks, regardless of size, get reported. But the ERCB also doesn’t record spills at pipeline facilities, like pumping stations, where many of them happen. That makes its numbers tough to compare with other jurisdictions.

The risks on small pipes are magnified by the low flows on stretches that might carry intermittent volumes of product from, say, oil tanks to a processing plant. When flow is slow or stopped, water and hydrogen sulphide are better able to corrode pipe. Sediments can also deposit, creating a mud where microbes can begin to eat away steel.

The ERCB played down the effect of corrosive products, which tend to create “pitting corrosion” that leads to “small volume spills (small leaks) that are not a significant safety hazard because they do not catastrophically rupture,” spokeswoman Cara Tobin said in an e-mailed statement.

(Although small pipes can lead to big spills: In December, 2011, 12,000 barrels spilled from a small Pengrowth Energy Corp. line, while 5,000 barrels leaked from a small Pace & Oil Gas Ltd. well pipe in May). The regulator requires surveillance of pipeline right-of-ways, corrosion evaluations, yearly inspections of water crossings and “continues to review and update its regulations and requirements to improve all aspects of pipeline performance,” she said.

Plus, industry has ways to combat corrosion. Pipes can be protected with MATCOR’s “cathodic protection,” products which uses electric current to counteract corrosion.  Cathodic Protection is mandatory in Alberta. They can also be chemically shielded from corrosion, and maintained with pigs, devices that travel inside the pipe, either to scrub it or detect areas of weakness.

But small pipe is often the hardest to “pig.” Worldwide, roughly a third of all pipe is not piggable. Alberta’s ERCB has no figure on what percentage of its pipe cannot accept pigs — and pigging is not required — but it’s likely to be large. Alberta’s pipeline system is made up of an enormous number of very short lengths, averaging just 1.6 kilometres long.

SOURCE: http://www.bnn.ca/News/2012/7/4/Albertas-big-small-pipe-problem.aspx