Yesterday, I had a lengthy Twitter discussion with Green Party Leader Elizabeth May, on the subject of oil pipelines and energy security. A few things in the discussion surprised me, and it also forced me to think a lot more about oil infrastructure in this country and to put some numbers to the question, “What would it take for Canada to be oil self-sufficient?” What would we have to put in place to supply all of Eastern Canada’s refineries with Canadian oil?
Let’s be clear on a couple of things up front – first, I don’t necessarily think that oil self-sufficiency is the right goal. If we can supply ourselves with oil at a lower net cost by exporting west or south and importing from the east, as we have for years, that’s likely the preferred solution. Second, I’ll have to leave a lot of details out of this post in terms of oil grades, refinery compatibility, etc. Third, I’ll assume that we run the existing Canadian refinery stock at nameplate capacity, regardless of Canadian domestic refined-product demand, with the balance of production going to export. Finally, I’m going to ignore the fact that the Enbridge mainline system runs through the US, and treat it as a potential bullet line from Western to Eastern Canada. More to come on each of those elements in future posts.
So, how much refinery capacity is there in Eastern Canada? There are 10 operating refineries, after the closure of Shell’s Montreal-East refinery, with capacities as follows:
|North Atlantic Refinery, Come by Chance, Nfld.||115,000 bbl/d|
|Imperial Oil Refinery – Dartmouth, NS||89,000 bbl/d|
|Irving Oil Refinery, Saint John, NB||300,000 bbl/d|
|Suncor Energy Refinery, Montreal, QC||160,000 bbl/d|
|Levis, (Ultramar/Valero), Levis, QC||215,000 bbl/d|
|Nanticoke Refinery (Imperial Oil), Nanticoke, ON||112,000 bbl/d|
|Sarnia Refinery, (Imperial Oil), Sarnia, ON||115,000 bbl/d|
|Sarnia Refinery, (Suncor Energy), Sarnia, ON||85,000 bbl/d|
|Corunna Refinery, (Shell Canada), St. Clair, ON||72,000 bbl/d|
So, the total refining capacity of almost 1.3 million barrels per day is housed in 4 distinct areas: Southwestern Ontario (384kbpd), Montreal and Quebec City (375kbpd), the Maritime provinces (389kbpd) and Newfoundland (115kbpd). Since pipelines are linear transportation infrastructure, the location of the capacity matters as much as the total number. (Thanks to Claude Boucher for pointing out that my table had failed to include the closure of the Gulf Oil 70kbpd refinery in Montreal, which closed in 1986!)
The second element of the calculation is Eastern Canadian oil production. The National Energy Board 2011 forecast sees significant decreases in production over the coming 25 years, with production decrease from about 310,000 barrels per day today to around 100,000 barrels per day by 2035. That means that today, over 1 million barrels per day of Eastern Canadian refining capacity must run feedstock imported from other regions – either by tanker or by pipeline, and that number will increase over time.
These figures line up quite closely (as they should) with domestic demand and import numbers. In January 2011, for example, the total domestic crude oil demand in Eastern Canada was 1.15 million barrels per day (combined heavy and light) while total imports were 660 thousand barrels per day, with the balance supplied by domestic production and western Canadian crude oil.
Bottom line – in order for Canada to be self-sufficient in terms of feedstock for our our existing refineries, we’d need to increase west-east crude movements by 600kbpd today, and by at least 800kbpd within the next couple of decades. If we simply wanted to set the bar at supplying enough crude to refine for our domestic consumption, that number decreases by about 60%, since during the same period (January, 2011), we exported about 475kbpd of refined products out of Eastern Canada.
So, what existing pipelines are in place which could make this happen? There are three major pipeline systems that currently bring crude oil into eastern Canada: the Enbridge Mainline (722 kbpd on Lines 5 and 6b) which terminates at Sarnia/Nanticoke, Enbridge Line 9 (240kbpd, connected to the mainline), and the Portland-Montreal pipeline (140kbpd).
In order to serve existing demand in Eastern Canada with Western Canadian crude, you would need significant changes in infrastructure, including the addition of new pipelines. Assuming that Eastern Canadian production remains sufficiently high to feed the Come-by-Chance refinery, you would need a reversal of Line 9, complemented by an additional 500-600kbpd of capacity between Superior, Wisconsin and Montreal along Enbridge Mainline and Line 9 routes. You’d also need new pipelines with 500kbpd of capacity from Montreal to Levis, with 400,000 continuing capacity to Saint John. As Eastern Canadian production declines, you’d also need a pipeline linking Saint John and Dartmouth to deliver 90,000 barrels per day. That’s a serious amount of new capacity.
What would that look like? Well, you’d need to install a 34-36″ line both between Superior and Sarnia, perhaps on the existing path of Line 5 (I doubt you’d get a lot of buy-in to twin Line 6b right now) and also on the existing right-of-way for Enbridge Line 9 if feasible, or on a new right-of-way, to Montreal. You’d likely continue with the same design through to Levis with a likely 30″ line running from Levis to Saint John – the project would likely be about twice the scale of Northern Gateway, as it would have to cover 1500-2000km of distance with similar diameter pipeline.
So, is it feasible? Yes, it’s absolutely feasible, but there are other issues which I’ll discuss in future posts. First, most of the refinery capacity in Eastern Canada is not equipped to run heavy and high-sulphur feedstocks produced by the oilsands, although refits would be possible. Second, assuming that some refits would be undertaken as a less costly alternative to upgrading prior to shipping, additional pipeline capacity might be needed to return diluents used to ship oilsands bitumen. Finally, and perhaps most importantly, there would be the issue of tolls and pricing. If you’re considering moving western canadian crude over 5000km to eastern canadian refineries located on tidewater ports, the key question would be who pays for that self-sufficiency? The transportation costs would likely be $12-15/bbl, meaning Alberta producers would consistently get $12-15 below the world price, or domestic refiners would pay more than what they could pay to access crude right off their shores. Figuring out that issue might be just as challenging as building the pipelines, as one of Ms. May’s tweets suggested.
I can’t imagine this will be the last post I write on this subject, but I hope this was an informative start. This is new research for me as well, so your comments on infrastructure alternatives are most welcome.