Canada’s oil and gas pipelines are the circulatory system of the Canadian hydrocarbons industry, transporting 97% of raw hydrocarbons produced. But what does this network of pipes look like on the ground (or, rather, below it), and why is it so important?
These questions became easier to answer recently when the Canadian Energy Pipeline Association (CEPA) published an interactive map of all the primary long-distance transportation pipelines and facilities operated by its members.
The map got me thinking about the importance of long-distance oil pipelines, and how there are still many people in the wider energy industry with limited knowledge of these critical pieces of infrastructure. Given the major role of pipelines in connecting the industry together (and making it more profitable), organizations of all sizes should take the time to properly understand the pipeline trends.
In this post I want to take you through some of the most interesting and important numbers at play.
Bringing the Goods to Market
Canada has the world’s 3rd longest pipeline system (after the United States and Russia). This system includes 114,000 km of primary transmission pipelines and around 720,000 km of gathering and distribution lines, enough to reach from the earth to the moon and back.
In 2014, the average barrel of Canadian crude travelled through 583 km of pipeline on its way to a refinery or international border. Vast distances and difficult weather conditions make pipelines the most reliable means of transit throughout Alberta. In the tar sands, long production curves make investments in expensive permanent infrastructure elements such as pipelines even more worthwhile.
The six major crude oil pipeline systems linking Canada to the United States can carry a combined total of around 4 million barrels per day. Thanks to the recent growth in tar sands production, production has exceeded this capacity, meaning that the excess product must be dumped on the local market at discounted prices or shipped by more expensive means such as rail. In 2012, the Canadian Imperial Bank of commerce estimated that the inability to reach foreign markets is cost Canada $18 billion per year in tax revenues.
Needless to say, the pipeline capacity shortage is widely seen as one of the major challenges currently facing the industry in Canada.
The Environmental Impacts of Pipelines
One of the main reasons that new Canadian pipelines have been a tough sell is that they would carry unconventional products that many associate with heightened environmental risks. In 2014, over half of the petroleum products produced in Canada were sourced from the Athabascan tar sands – and despite the recent fall in the price of oil, production from the tar sands along is expected to grow to 3.8 million barrels per day by the end of the year. The bitumen produced from the tars sands is too viscous to flow through pipelines, meaning that is must be mixed with other petroleum products to form “dilbit”, or diluted bitumen. Studies have found that dilbit is significantly more difficult to clean up than conventional oil in the event of a spill.
As a result of the pipeline capacity shortfall, on the average day in 2014, 185,000 barrels were shipped by train in 2014. This is unfortunate because a recent study by the Fraser Institute found that transporting a given volume of oil by pipeline is 4.5x safer than transporting it the same distance by train.
The issues surrounding the construction of new pipelines in Canada are complex and will have to wait for another blog post. Hopefully, the statistics here serve as a useful reminder of the significant challenges and opportunities pipelines present for all of us in Canada’s oil industry.