The International Energy Agency published its annual five year oil forecast yesterday and warned that oil pipeline constraints are part of a wider capacity issue that is brewing across North America. The IEA forecasts that crude-by-rail exports could double over the next two years as pipeline shortages force producers to rely on alternatives.
The IEA reports that “delays to pipeline approvals and uncertainty regarding the provision of more export capacity is undermining the next wave of development as market access costs are set to rise”. Consequently, rail capacity will become an integral part of the supply chain and could provide up to 900 000 bpd of spare export production.
With continued growth expected in Canada’s oilsands production, crude-by-rail shipments are predicted to grow from 150 000 bpd in late 2017, to 250 000 bpd in 2018, then to 390 000 bpd in 2019, assuming producers don’t resort to crude storage in peak months, reports the IEA.
For rail shipments to return to the 170 000 bpd level in 2020, the Enbridge Inc. Line 3 pipeline would need to be replaced between Hardisty, Alberta, and Superior, Wisconsin. However, the project is facing significant opposition in Minnesota and Enbridge isn’t expected to hear on its environmental approval in the state for several months. Further capacity could also come from Enbridge optimising its Mainline pipeline system, which could provide 125 000 bpd of takeaway capacity.
“Colossal growth in North American supply from 2018 to 2023 raises the crucial question of whether there is enough pipeline capacity to transport and sell all of that oil,” the Paris-based IEA said in its report. “If sufficient capacity is not built, the increase in production we foresee could be at risk, with serious implications for global markets.”
The lack of export space has helped contribute to the sell-off of oilsands assets from Shell, ConocoPhillips and Marathon Oil and the lack of new development approvals, said the IEA.
Read the article online at: https://www.worldpipelines.com/business-news/06032018/pipeline-shortage-could-lead-to-increased-crude-by-rail-shipments/