Gibson expanding oil storage in Hardisty
CALGARY — Demand for oil storage in Alberta has grown so strong in the current lowprice environment that Gibson Energy Inc. is planning to expand its terminal capacity at Canada’s largest crude storage hub by a third.
Gibson, one of the largest oilfield service firms in Canada, announced Monday that it would add 900,000 barrels of oil storage capacity to its terminal at Hardisty, Alta., underpinned by contracts with Teck Resources Ltd. and other unnamed crude oil producers.
Even before this latest announcement, the company was already in the midst of adding seven other oil storage tanks to its operations in the east-central Alberta town, which is home to the largest concentration of crude-oil storage tanks in Canada.
Once complete, the company will have the ability to store eight million barrels of crude oil at Hardisty.
“Despite today’s depressed oil price environment, a robust growth profile remains in place for oilsands related volumes,” Gibson’s chief operating officer Rick Wise said in a release.
Benchmark oil prices have collapsed by 50 per cent since June 2014, and the West Texas Intermediate benchmark price closed Monday at $51.91 US.
Despite the fall, oilsands production will continue to swell.
And analysts expect the demand for oil storage in Alberta to keep rising.
Teck, for instance, is a partner with Suncor Energy Inc. and Total E&P Canada Ltd. in the Fort Hills oilsands project, which is currently under construction north of Fort McMurray, and expected to produce 180,000 barrels of oil per day once complete in late 2017.
To meet the growing demand, Gibson’s competitors have also been adding storage capacity in Hardisty and also in Edmonton, which is another large oil storage hub in Western Canada.
“There have been lots of capacity expansion projects,” said Genscape oil storage analyst Dylan White. He listed storage-terminal builds by Kinder Morgan Canada Ltd. in Edmonton and TransCanada Corp. at its own terminal in Hardisty.
FirstEnergy Capital Corp. analyst Steven Paget noted that Gibson is planning to spend $280 million on its terminals and pipelines business unit this year.
“You’re looking at easily 10 million barrels of expansion that have come online in the last three to five years and there’s no signs of stopping,” White said.
Gibson spokesperson Cam Deller said that his company’s new storage tanks under construction at Hardisty would be built in response to the demand from oil producers for “operational storage,” rather than the demand from traders playing the current market contango.
Contango — a market dynamic where oil delivered in the future is priced higher than oil delivered today — has caused oil storage levels to rise at terminals across North America and around the world, as spot prices continue to drag.
The latest data from the U.S. Energy Information Administration show there were more than 60 million barrels of oil stored at Cushing, Okla. at the beginning of April — a level approaching maximum capacity in the region.
White said that once other oil storage hubs reach their maximum capacity, traders could look increasingly toward Hardisty and Edmonton as locations to take advantage of the contango.
He said that oil storage levels at Edmonton have reached almost 65 per cent of total capacity, and that oil storage has also been building at the larger Hardisty hub too, where tanks are 50 per cent full.