This article was originally published on RBN Energy by Sandy Fielden
TransCanada currently owns just over 1 MMBbl of crude storage at Hardisty that is used to stage operations on the existing 580 Mb/d Keystone pipeline to the US. With two huge new pipelines planned to originate at Hardisty – the 830 Mb/d Keystone XL (still awaiting Presidential approval) and the 1.1 MMb/d Energy East potentially coming online in the next four years, the company is rapidly expanding Hardisty capacity. At the same time Gibson Energy and US Development Group are building a 120 Mb/d rail terminal close by to Hardisty that will give Canadian producers the option to bypass pipeline congestion. Today we describe these companies’ infrastructure plans.
This is Part 6 of our series on Canadian crude oil storage. In Part 1 we looked at increasing Canadian crude oil production and expanding pipeline capacity in the two crude marketing hubs of Edmonton and Hardisty. These hubs are the staging posts for crude oil exports to the US as well as the distribution point for diluent supplies coming into the oil sands production region. In Part 2 we turned our attention to the relationship between Canadian crude pricing, congestion on the crude pipelines leaving Edmonton and Hardisty, and storage inventory. The growth and use of storage capacity at Edmonton and Hardisty bears a strong relationship to price discounts that Canadian producers have had to swallow as a result of pipeline congestion. In Part 3 we looked at TransCanada and MEG Energy’s Edmonton storage expansion plans. In Part 4 we reviewed Kinder Morgan, Keyera, Gibson Energy, Enbridge and Pembina’s growth projects at Edmonton. ForPart 5 we turned our attention to the Hardisty hub and detailed Enbridge and Husky’s operations. This episode covers TransCanada and Gibson Energy at Hardisty.
TransCanada currently owns three 355 Mb/d storage tanks at Hardisty – just over 1 MMBbl of capacity that is used for staging operations around the original Keystone pipeline. That 590 Mb/d pipeline has been shipping Western Canadian crude successfully from Hardisty to Steel City NB and Cushing, OK since 2010. TransCanada is now in the process of building up terminal operations in Hardisty in the expectation that two new pipeline projects will proceed. The first of these is the long awaited Keystone XL extension that will add 830 Mb/d of capacity between Hardisty and Cushing if it receives Presidential approval – a decision now expected at the end of 2014. The second TransCanada pipeline project out of Hardisty is the proposed Energy East pipeline that will ship as much as 1.1 MMb/d of crude to Eastern Canada. The map below shows the existing and planned major TransCanada pipelines extending out of Hardisty.
In preparation for expanding crude shipments from Hardisty, TransCanada is beefing up its storage operation in Edmonton as we saw in Part 3 of this series with the TC Terminals project and the Heartland Pipeline from Edmonton to Hardisty that will ultimately ship up to 900 Mb/d. At Hardisty, after a successful open season in 2013, TransCanada has submitted applications for regulatory approval to build an expanded Keystone terminal with 2.6 MMBbl of new storage capacity and pipeline infrastructure to allow producers to move additional crude into the Keystone XL pipeline. Canada’s National Energy Board is currently reviewing the Keystone Terminal Expansion project. If approved, the terminal is expected to be built and online by the end of 2014 at a cost of $275 Million. TransCanada received binding commitments for over 500 MBbl of storage during the open season.
And the planned starting point for the Energy East Pipeline - that is expected to commence construction in 2016 if approved - is another new TransCanada tank terminal at Hardisty – although the company has not indicated the proposed terminal capacity yet. The Energy East project plan also calls for three new terminals along the route: one in Saskatchewan, one in Québec City and another in St John, New Brunswick. The Québec City and Saint John terminals will include marine tanker loading facilities – allowing for crude exports. The project will deliver oil to existing Québec refineries in Montréal, near Québec City and in Saint John (see What Becomes of the Empty Pipelines Part 1 and Part 2 for more on the Energy East project).
In Part 4 of this series we covered Gibson Energy’s terminal infrastructure build out in Edmonton including a major storage and rail loading facility project for producer Statoil. Gibson also has significant infrastructure at Hardisty where the company first built a terminal in1957 and operates a 6 Mb/d natural gas liquid fractionation plant and a propane distribution business (Canwest). The Gibson terminal at Hardisty has current storage capacity of 4.3 MMBbl associated with the Provost and Bellshill gathering systems that deliver crude oil from over 30 individual producer-owned production facilities. Gibson also delivers crude to Hardisty by truck.
The company is in the process of expanding storage capacity at Hardisty to accommodate increased crude production. The Hardisty East Expansion project that was announced in stages between September 2012 and May 2013 will add 1.7 MMBbl of new storage capacity in the shape of three 400 MBbl and one 500MBbl tanks on Gibson’s East Hardisty acreage. The new tanks are expected to be in service between mid-2014 and early 2015.
In August (2013) Gibson announced a partnership with US Development Group (USDG) – a Houston based rail logistics developer – to construct a unit train crude-by-rail loading facility about 3 miles from the Hardisty storage hub. Gibson will build a pipeline connecting their Hardisty East expansion terminal to the new Hardisty Rail Terminal. Served by the Canadian Pacific Railroad’s North Main Line, the terminal will provide producers with a rail alternative to ship their crude to Canadian and US markets (see map below). The Hardisty Rail Terminal will be able to load up to 120 Mb/d onto two unit trains with 120 railcars each. Loading facilities will consist of a fixed loading rack with 30 railcar positions and a unit train staging area capable of holding up to five unit trains. The Hardisty Rail Terminal is targeted to begin operation in the first quarter of 2014. Term contracts with four customers for approximately 100 Mb/d underpin the investment.
The addition of the Gibson USDG unit train rail loading facility at Hardisty provides the flexibility of crude destinations indicated by the above map. We have covered the economics of crude-by-rail competition with pipeline routes to market from Canada extensively in previous RBN blogs (see the Go Your Own Way series). Although Canadian producers have been slow off the mark to embrace unit rail crude transport compared to their US counterparts in the Bakken, the Gibson terminals at Edmonton and Hardisty and the Kinder Morgan Keyera and Canexus terminals at Edmonton will provide open competition for capacity to US markets from Western Canada. If the TransCanada Keystone XL or Energy East pipelines do not proceed or are delayed significantly, rail capacity out of Alberta may expand even more rapidly.
The final installment in this series will cover Hardisty infrastructure operated by Spectra Energy, Flint Hills Resources and Inter Pipeline.