Wildfires are a recurring problem in Canada. The country averaged over 8000 wildfires per year between 1970 and 2015, covering an average of nearly 2.3 million ha. of land annually. Since 1990, an average of 1273 wildfires have taken place in Alberta each year, according to Canada’s National Forestry Database.
Unlike earthquakes in Oklahoma, the problem does not seem to be escalating. The annual average of Canadian wildfires from 2006 - 2015 was the lowest 10 year average on record. Although the scale of the natural disaster has not increased, the buildout of infrastructure since 2007 has, quite literally, put the industry in the line of fire.
In May 2016, wildfires originated near Fort McMurray (Alberta) and spread through northern Alberta. Flames spread 500 000 ha. to the Saskatchewan border and displaced more than 80 000 residents before the fire was contained over two months later. Although no oil-related infrastructure was damaged, a significant portion of Alberta’s crude production was shut as employees were evacuated, and the subsequent reduction in output had a ripple effect across Canadian and US crude markets.
Alberta’s crude output decreased by more than 600 000 bpd in May 2016 as fire-related production cuts compounded with scheduled maintenance. Production levels did not fully recover until August 2016. Reduced output led to significant declines in pipeline exports from Canada.
Cross border flows fell nearly 1.4 million bpd, to 1.9 million bpd in the 10 days after the fires began. Total monthly flows in May 2016 fell by 364 000 bpd, to 2.7 million bpd; the lowest monthly average of 2016. Decreased flows from the region were driven by reduced shipments along Enbridge’s 2.665 million bpd Mainline and TransCanada’s 590 000 bpd Keystone pipelines.
Weathering the storm
Hurricanes in the Atlantic Basin have become more prevalent in recent years. The US National Climate Assessment states: “The intensity, frequency and duration of North Atlantic hurricanes, as well as the frequency of the strongest (Category 4 and 5) hurricanes, have all increased since the early 1980s.”
Several hurricanes in the past few years have made landfall along the Gulf Coast, which is a critical crude production region and the world’s largest refining complex.
Hurricane Hermine made landfall in Florida (USA) on 2 September 2016, resulting in a deficit of crude supply to the Gulf Coast. Genscape’s US Crude Oil Production report estimates that between 25 August and 1 September, a total of 5.348 million bbls were lost due to the storm.
In the week following, flows on the 1.2 million bpd Marathon-operated Capline pipeline, which carries barrels from St. James (Louisiana, USA) to multiple destinations in the US mid continent, decreased by 121 000 bpd, to 272 000 bpd.
Though the storm limited supply, pipeline operations were not necessarily disrupted in this case, nor by any Gulf Coast hurricanes in 2016. However, hurricanes often bring coastal flooding, which has the power to halt pipelines entirely in extreme cases.
In December 2015, heavy rainfall from a slew of strong storms caused substantial flooding in the Mississippi River Basin.
The high water levels also affected crude pipeline operations. Enbridge’s 235 000 bpd Cushing to Wood River (Illinois, USA) Ozark pipeline and Spectra’s 145 000 bpd Platte pipeline, running from Guernsey (Wyoming, USA) to Wood River, were shut on 29 and 30 December 2015, respectively. The Ozark pipeline was shut for a week, while the Platte line was shut for four days.
Much like the Alberta oilsands, the Gulf Coast has benefited greatly from increased oil production in recent history. Additionally, significant transportation and storage is required to accommodate regional refinery demand. Texas and Louisiana collectively have more than 9 million bpd of refining capacity.
The flood of domestic barrels from ever-growing Permian Basin and Eagle Ford production spurred numerous midstream projects, such as Sunoco’s Permian Express (Phases I and II) pipeline, Magellan’s BridgeTex and Longhorn pipelines, Kinder Morgan’s Crude and Condensate pipeline and Plains All American’s Cactus pipeline.
Pipeline operations require new storage infrastructure. At Genscape-monitored storage locations in Texas and Louisiana, total crude storage capacity increased by more than 38 million bbls, to 216 million bbls between 2015 and 2017. Data from Genscape shows that nearly 9 million bbls of storage capacity were under construction in the region as of March 2017.
Several midstream companies have announced plans to expand existing pipeline infrastructure to connect these storage terminals. Expansions to the BridgeTex, Cactus and Permian Express pipelines are all expected by year end 2017, for a total of 340 000 bpd added capacity. Enterprise Products Partners also expanded the capacity of its new Midland-to-Houston pipeline by 150 000 bpd, to total 450 000 bpd.
Canadian production has reached 3.8 million bpd and is expected to exceed 4.2 million bpd by 2018, subject to available outgoing capacity. Additional takeaway capacity out of western Canada will be critical for this level of production forecast to come to fruition.
As the spider web of oil-related infrastructure continues to expand in North America, so does the likelihood that a natural disaster will have an extensive impact on the crude supply chain. This possibility is further strengthened by the uptick in certain extreme weather events observed in the 21st century. Although the risk is inevitable as the industry grows, it will be increasingly imperative to closely monitor potential encounters to ensure that any disruptions are pre-emptively avoided or properly mitigated.
Read the article online at: https://www.worldpipelines.com/special-reports/28122017/encountering-extremities-part-2/
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