Taking North America’s temperature

For the last several years, North America’s energy industry has been experiencing unprecedented upheaval. Gyrations in demand due to COVID-19, deadlines for net-zero carbon emissions, environmental activism and the side-effects of the Ukraine war have all created tremendous economic and logistical complications that affect every aspect of the sector, including pipelines.

Canada

Canada is blessed with an abundance of hydrocarbons; both conventional and unconventional. While most attention has been focused on production of gas from shales in the US, the Montney formation in northeast British Columbia (B.C.) has been flying under the radar.

The extensive shale contains an estimated 450 trillion ft³ of gas and currently produces 5.8 billion ft³/d. Producers have proposed processing capacity to eventually double production to 11.5 billion ft³/d. Several pipeline systems are being expanded to meet the expected increase. Enbridge has earmarked CAN$1.9 billion to expand its Westcoast natural gas system that services B.C. and Alberta. In November 2022, it announced an open season to its T-North segment, which runs from Fort Nelson in northern B.C. to southern and eastern consumers. Sufficient consumer interest could result in an additional 500 million ft³/d of capacity.

Construction on TC Energy’s Coastal GasLink pipeline is nearing completion. The 670 km line runs from northeastern B.C. to the Pacific port of Kitimat, where it will supply up to 2.1 billion ft³/d of gas to Shell’s LNG Canada plant (currently under construction). The pipeline, which is scheduled to come online in 2023, has been plagued by fractious protests from First Nations factions opposed to the ROW crossing ancestral lands. Cost overruns due to labour shortages and logistics related to COVID-19 have also caused the budget to grow from an original CAN$6.6 billion to over CAN$14.5 billion. Despite the challenges, TC Energy is in discussions with Shell in regards to Phase 2 of the latter’s LNG project that would require increasing capacity to 5 billion ft³/d.

In late 2022, Enbridge launched a successful open season on an expansion programme on the T-South portion of its pipeline system in B.C. The system runs from the Ft. St. John region in northeast B.C. to the US border south of Vancouver. The Sunrise Expansion Program would increase export capacity by 300 million ft³/d through looping and additional compression. Pending FID, the expansion is being targeted for 2028.

Canada’s total crude production exceeds 5 million bpd. The oilsands of Alberta is the largest single source, with 3.3 million bpd, and output is expected to rise to 3.6 million bpd over the next decade. Canada exports approximately 4 million bpd to the US, which is expected to rise to 4.2 - 4.4 million bpd by 2026.

Because its export markets are limited, Canadian crude is often sold at significant discount when US refineries go offline or demand slows. In order to develop alternative outlets, Kinder Morgan initiated an expansion of the Trans Mountain line (TMX), which carries 300 000 bpd from Alberta to the port of Burnaby, B.C., near Vancouver. The TMX has also confronted significant environmental opposition, as well as COVID-19 related delays and severe flooding of the ROW. As a result, the cost has increased from an original estimate of CAN$12.6 billion, to over CAN$21 billion. Once the expansion becomes operational in 2024, it will deliver up to 890 000 bpd to its expanded Burnaby terminal. Ironically, the primary expected destination is no longer Asia; refiners in that region are gorging on cheap Russian oil, and the likely buyers for TMX output will be in Washington State, Oregon and California.

USA

In the US, pipeline growth is being driven primarily by the push to export gas and crude from the US Gulf Coast (USGC) to jurisdictions around the world. According to the Energy Information Administration (EIA), USGC (PADD 3) exports averaged 2.48 million bpd in 2021; by late 2022, that number had grown to over 4 million bpd, with the majority of the increase coming from the Permian basin and Western Canada.

Increasingly, midstream efforts are focusing on export facilities. In May, 2023, Enbridge announced a binding open season for the..

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