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Enbridge to expand Athabasca pipeline Add to ...

Far from the house-sized trucks and gaping oil sands pits near Fort McMurray, Alta., the oil patch is building the new roads and industrial facilities that will form the backbone of a quiet, but major, expansion.

The growth explosion has been masked, in part, by the fact that it is the work of several companies – and because their work does not attract the same attention as the visually dramatic mines. But on Monday, Enbridge Inc. shone new light on the scale of the energy industry’s ambitions in the southern reaches of the oil sands with a $1.2-billion plan to expand its Athabasca pipeline.

The company plans to add 450,000 barrels a day of capacity by twinning the line between Kirby Lake, 145 kilometres southeast of Fort McMurray, and Hardisty, a major oil hub southeast of Edmonton. The new 345-kilometre pipe, which is expected to begin moving oil by 2015, can be expanded to 800,000 barrels a day, substantially adding capacity to a system whose existing capacityis570,000 barrels a day.

The Kirby Lake area is in many ways the next chapter of the oil sands. The heavy bitumen oil there is located too deep to mine. Instead, companies use wells to inject high-pressure steam underground, melting out the bitumen so it can be drawn to the surface. It’s called in situ extraction, and the Kirby Lake area has proven especially prospective for this method.

It has drawn attention from numerous major oil producers. Cenovus Energy Inc., ConocoPhillips, BP PLC, Devon Energy Corp., Korea National Oil Corp. and MEG Energy Corp. all own land there. Last year, Enerplus Corp. sold its holdings there to Canadian Natural Resources Ltd. for $405-million.

Today, those companies produce about 130,000 barrels per day of crude. But a total of 1.4 million barrels of daily production is either planned or underway. That is roughly equivalent to the output of the entire oil sands complex today.

The Kirby Lake area has emerged as a “sweet spot,” with an underlying geology that has proven especially lucrative, said Chris Seasons, the chief executive officer of Devon Canada. He pointed to the results of several companies’ projects as evidence.

“Christina Lake from Cenovus, Christina Lake from MEG, Jackfish from ourselves – those are all top of the heap in terms of production performance and profitability,” he said. “So I think what you’re seeing is Enbridge is recognizing that.”

Devon and MEG jointly own the Access pipeline, which also takes crude from the Kirby Lake area. Expanding Access is also an option, Mr. Seasons said.

In a particular boon to pipeline companies, in situ oil sands producers actually require far more pipe capacity than those numbers would suggest. Their bitumen is so thick that it must be diluted before it can be sent to market. Depending on what’s used, thinning agents – which can either be lighter oils or other hydrocarbons – can add between 40 and 100 per cent to the volume of the bitumen. In other words, 1.4 million barrels a day from the greater Kirby area could require more than 2.5 million barrels of pipeline capacity.

 

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