potential damage to watersheds and indigenous lands. After numerous court challenges were defeated, work was completed in late 2021, adding 380 000 bpd capacity. In addition, the CAN$21.4 billion expansion of the 300 000 bpd Trans Mountain pipeline, which runs from Alberta to tidewater at Burnaby, British Columbia, is 45% complete. It will add 590 000 bpd of export capacity when the twinned line opens in 2023. Operators were forced to temporarily shut down the line in November, 2021, when torrential rains inundated the Lower Mainland region. The line was eventually restarted a month later, but not before refineries in the area ran out of crude and suspended operations. The Montney shale in northeast British Columbia and northwest Alberta holds over 400 trillion ft³ of fluids-rich gas. Production exceeds 5 billion ft³/d, creating 169 000 bpd of natural gas liquids (NGLs) that is overwhelming current capacity. In August 2021, Keyera Corp finally began construction of its Key Access Pipeline System (KAPS) from northwestern Alberta to the Edmonton region. The 300 mile system, consisting of a 16 in. line for condensate and a 12 in. line for NGLs, is expected to be completed in 2023. The line had originally been slated for completion in 2022, but was delayed by COVID-19. Also in August 2021, Brookfield Infrastructure Partners took over Inter Pipeline Ltd. with a CAN$8.6 billion offer to majority shareholders. The Toronto-based company initiated a hostile takeover bid in early 2021, having identified undervalued assets, including a crude pipeline network in Western Canada and the Heartland Petrochemical Complex under construction near Edmonton.
United States Crude production in the US suffered significantly from COVID, dropping from an all-time high of 13 million bpd in 2019 to 11 million bpd in 2020. Although production has been recovering, pipeline over-capacity has been a persistent headache. According to Wood Mackenzie, pipeline utilisation rates for crude pipelines in the US stood at 50% in late 2021; that compares to 60 - 70% utilisation rate prior to COVID-19. Not all lines are suffering; in order to maintain flows, many midstream companies offered discounts. The Gray Oak Pipeline, for instance, has a 94% utilisation rate; its owner, Phillips 66, is offering uncommitted tariff rates below US$2.97/bbl, compared to US$4/bbl for competitors. Shale oil is also making a recovery as crude prices rise above US$90. Permian crude production exceeded 5 million bpd in February, 2022, as rig counts rose and completion crews headed back to work. (To put that in context, if it were an OPEC member, the Permian basin would be the second highest producer, exceeded only by Saudi Arabia). The resurgence of production is expected to significantly ease low capacity rates in regional crude pipelines, bolstering midstream bottom lines.
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World Pipelines / MARCH 2022
In late 2021, Plains All American’s reconfigured Capline pipeline entered service. Originally built in 1967 to move imported crude north from Louisiana to the Patoka, Illinois hub, it eventually became a white elephant as domestic sources were developed. Now, the 1017 km, 40 in. pipeline has been reversed in order to deliver 200 000 bpd to the Gulf Coast. The reversal has already had a direct impact on Canada’s exports from the US Gulf, which hit an alltime high of 266 000 bpd in December, 2021. Up until 2020, exports to countries other than the US had been hampered by a lack of tidewater terminals, rarely exceeding 70 000 bpd. Operators in the oilsands can now use Capline to access VLCCs in the Louisiana Offshore Oil Port (LOOP). With Venezuelan exports down dramatically and Mexico’s exports in doubt, India, China and other parts of Asia are seeking out Canadian heavy crude for their refineries. Natural gas is also making a comeback. After suffering low prices through much of 2020 and early 2021, gas surged in late 2021 to finish the year at US$4.70/MMBtu. S&P Global Platts Analytics reported that Permian gas production, which stood at 13 billion ft³/d in late 2020, is expected to surpass 14 billion ft³/d in early 2022. Much of that gas is heading south to Mexico. The country consumes over 8 billion ft3/d, but domestic gas production has been lagging. As CFE, Mexico’s national utility company, converts production from bunker-fuel, natural gas consumption is expected to rise significantly. There are 20 gas lines in service crossing between the US and Mexico, with a total capacity of over 11 billion ft³/d. The Permian basin has seen several major lines come on-stream; Kinder Morgan’s Permian Highway Pipeline came online in early 2021, moving up to 2.1 billion ft³/d from the Waha hub in West Texas to the Gulf Coast, and Whitewater’s Aqua Blanca began operations in early 2021, transporting 1.8 billion ft³/d to the Waha hub. In November 2021, the 1.35 billion ft³/d Double E gas pipeline, a JV between Summit Midstream and ExxonMobil’s XTO Energy, entered service. The 135 mile line will accept gas from seven processing plants in New Mexico and Texas and deliver it to the Waha Hub, where it will have connectivity to East Texas and the Mexican border.
Challenges For the last several years, pipelines have been kicked around like political footballs. On his first day in the White House, President Biden cancelled TC Energy’s Keystone XL pipeline, a 2000 km express line designed to deliver 830 000 bpd of Alberta crude to the USGC. Over the course of 12 years, the proposed line had already been cancelled by the Obama administration and reinstated by the President Trump. In November 2021, TC Energy Corporation formally filed a trade appeal under provisions of the North American Free Trade Agreement (NAFTA), seeking US$15 billion in damages. “The US decision to revoke the permit was
