Bitumen diluent demand will double by 2020, report says
CALGARY — Western Canadian demand for condensate, a light petroleum liquid used to dilute oilsands bitumen so it will flow in a pipeline, is expected to more than double to 750,000 barrels per day by 2020, according to a new study.
Furthermore, the price of condensate is expected to continue to command a premium over benchmark crude after trading at an average of $113 Cdn per barrel in Edmonton in the first quarter of 2014, the highest average quarterly price since 2008, says the report from Calgary investment bank Peters & Co.
“The shortfall in condensate supply in Western Canada has created a robust pricing market which has been beneficial for the liquids-rich natural gas producers, and it has also been one of the key growth drivers for the few midstream companies that dominate this market,” says the study.
“We expect condensate prices in 2014 to remain volatile but strong, with line-fill for Cochin driving shortterm premiums, and these premiums moderating when this pipeline and additional volumes from Southern Lights come on stream.”
Kinder Morgan Energy Partners has announced it will reverse its Cochin propane export pipeline from the Chicago area to Edmonton to become a 95,000-barrelper-day condensate import line with startup as early as July 1.
Calgary-based Enbridge Inc. is considering the expansion of its 180,000-bpd Southern Lights pipeline, which also ships diluent from the Chicago area to Edmonton. The line could be expanded by almost 100,000 barrels per day at a cost of $700 million and be in service by late 2016, it says.
Enbridge is also gauging shipper interest in a $1-billion conduit through northern Alberta called Norlite, which could initially ship 200,000 barrels per day of light oil or condensate to oilsands customers — Calgary midstream company Keyera Corp. has an option to take a 30 per cent interest in the line.
Keyera president and chief operating officer David Smith said his company is investing in the condensate story on both the processing and transportation ends.
“There are two things really driving the growth opportunities ... we have right now,” he said Wednesday.
“Liquids-rich gas development is driving increased throughput at our gathering and processing facilities and additional investment opportunities in gathering systems and capacity expansions (in west central Alberta).
“In addition, the continued development of the oilsands and the continued growth in bitumen production is driving investment opportunities for us around our liquids facilities in Edmonton and Fort Saskatchewan and at South Cheecham (in northeastern Alberta), where we recently completed a rail terminal to serve the oilsands producers.”