by ROCKMAN » Tue 07 Jan 2014, 19:03:30
I still find it utterly amazing how some folks who think they understand the big picture really don’t. This from NBC that has more than enough resources to get it right but apparent lacks the ability to do so. Pay attention to what they don’t point out: the southern leg of Keystone XL has been completed and will be delivering Alberta oil directly to Texas refineries this month. But how can that be…they haven’t got the border crossing permit? Easy: they’ll continue to ship 600,000 bopd that has been coming across the border in the Keystone Pipeline. The other Keystone Pipeline...not the Keystone XL Pipeline. This line has been in operation since Oct 2010. This oil will be shipped to the EXISTING sections of KXL (the 98% of the KXL Pipeline that didn’t require federal permits to be built) that will deliver it to the Texas refineries. And no: they are not going to ship a lot of oil to Texas by rail. They are going to ship it across the border from Alberta to offloading terminals on the US side where the oil can be taken by a variety of other pipeline systems. These terminals have been built or expanded during the last year or so.
All it takes is a bit of common sense, which, as they say, isn’t so common. The Cushing, OK to Texas pipeline throughput has already been expanded by 400,000 bopd in addition to the new southern leg of KXL. And construction is underway to expand that volume by at least 800,000 bopd within two years. There are existing pipelines that cross the US/Canadian border that are being expanded as well as existing pipelines in the US being expanded that are capable of receiving rail oil.
So from NBC: Canadian oil rides south even without Keystone pipeline
“The equivalent of hundreds of thousands of barrels of oil a day will soon be moving from western Canada into the U.S.—even if the controversial Keystone XL Pipeline is never built.”
{FYI: there are currently 2.4 million bopd of oil already moving from Canada to the US. A minor oversight on the part of NBC}
“Canada's railroads, Canadian Pacific Railway Ltd and larger Canadian National Railway Co both report expanded oil shipments this year and both expect demand to continue to grow. Canadian Pacific told investors it expects shipments of 85,000 to 90,000 car loads by the end of the year. A spokesman for Canadian National said the railroad expects to see 60,000 carloads this year, double last year's level.
As the U.S. contemplates the merit of the stalled Keystone pipeline project, which would take Canadian oil to U.S. Gulf Coast refineries, rail companies in Canada have been moving quickly to add capacity in five major projects. By the end of next year, rail loading capacity could grow enough to handle 700,000 barrels of crude a day from the oil sands region in western Canada, according to IHS data. Trains currently carry just 150,000 barrels from there, and more than 450,000 barrels a day could be riding the rails by the end of next year.”
{And once more: the Keystone XL is not stalled but is scheduled to begin delivering Alberta oil to Texas refineries on 22 January. The only stalled portion of KXL is the few miles that will physically cross the border}
"It's important because access to the Gulf Coast is really critical for oil sands producers, but there are other options to get there. The supply will come on at a similar rate in the longer-term because we think other pipeline options and/or rail will get the crude there," said Jackie Forrest, IHS director of global oil.
Keystone is designed to carry 830,000 barrels per day. If the pipeline is not built, IHS expects to see 700,000 barrels moving by rail by 2016. Rail transport could peak at 500,000 to 600,000 if TransCanada's Keystone and another Enbridge pipeline project, which does not need State Department approval, are put into operation, because of expected growth of oil sands production.
Analysts say oil sands production has been slowed by the lack of transport but rail is helping to change that. "The pipelines that are out there have regularly been on allocation. It's like an over-subscription of oil, and we know the Canadian government has been trying to actively get a pipeline built to the west but they've so far been unable because there's resistance by Native groups," said John Kilduff of Again Capital. "Now, they're looking east—to a pipeline that would transport it to the East Coast."
{So the oil sands production has been slowed by the lack of transport. But there was enough transport available for more oil to be shipped to the US during 2013 than ever before in history}
The cost of shipping oil in the U.S. by rail is about $4 to $5 more expensive per barrel than by pipeline, and shipping oil by rail from the Canadian oil sands to the Gulf Coast would be $7 to $8 more expensive per barrel, Lipow said. But Lipow said the capacity for rail shipment out of western Canada is rising quickly and the numbers keep getting bigger. "My number is 550,000 barrels a day between now and the end of 2014," he said.
In the U.S., rail traffic has also increased dramatically as a way to get land-locked crude out of production areas that have inadequate pipeline service. Lipow said in the second quarter of 2013, 109,000 car loads of crude were loaded by class one railroads in the U.S. In 2011, the second quarter shipments were 12,000 and in 2009, there were just 2,500 second quarter car loads.
{Now think about the numbers they just offered: 150,000 bopd moving out of Canada by rail and 109,000 bopd moving by rail in the US: so exactly where is that difference (15 million bo per year) going? Maybe getting dumped from Canadian railcars into pipelines on the US side of the border. And when they increase the Canadian rail shipments to 200 million bo per year is it going into all those US tank cars that don’t exist today or are they going into the existing pipeline systems that move oil at half the cost of US rail?}
Just last week, Exxon Mobil told analysts it is looking into the construction of a rail terminal in Edmonton to transport its oil sands output. Exxon is partnering with Imperial Oil Ltd on the Kearl project, currently producing 100,000 barrels per day and expected to grow to 220,000 by 2015 and max out at 345,000 barrels a day by 2020. "But, as would be prudent, we are looking at other options, including evaluating a project to build a rail terminal in Edmonton and then move some of that crude out of there into the Lower 48 by rail. And we're in the process of evaluating that opportunity and we'll have more to say on that in the future," Rosenthal told analysts after the company reported earnings. "We're very fortunate in that we have a very good logistics optimization opportunity and network and a lot of avenues for us. But we are actively working on all of the alternatives that are available to us to move that crude into market and get the maximum value for those molecules."
{Again notice all the chatter is about expanding oil rail transport out of Canada…not one word about expanding oil rail transport in the US}
The fate of the controversial pipeline lies at the State Department, which is determining whether the pipeline serves U.S. interests or hurts the environment. A final environmental study on climate change impact is awaited, and some industry officials expect it by spring. It would then go to eight other federal agencies for a 90-day comment period.
{No…the fate of the Keystone XL Pipeline system does not rest in the hands of the State Department…just those few miles of the pipeline that crosses the border. The remaining 1,700 miles of the pipeline do not require fed approval}
The stretch of Keystone pipeline, which is opposed by environmentalists, would send oil from Alberta, through Montana, across South Dakota and Nebraska, to the Cushing extension in Kansas and then south into the southern leg of the Keystone and on to the Gulf Coast refining area.
{While environmentalists may be opposed to the sections of KXL that will go through Montana, S Dakota, Nebraska and Kansas these sections have been approved and are under construction. The section through Nebraska had to be rerouted but the governor approved the new route more than 6 months ago}
"The State Department is trying to evaluate whether the Keystone XL Pipeline is going to materially affect greenhouse gas emissions. Now the pipeline by itself, running some pumps is not creating greenhouse gases," said Lipow, adding the same cannot be said for the train transport.
{IOW shipping the oil across the border by rail is, in the opinion of the State dept, creating more GHG than if they allow the border crossing section of KXL to be built. They may not have a timeline to make the decision but they seem to be telegraphing what they’ll eventually decide IMHO}
Kilduff said the way that the heavy bitumen, produced from the oil sands, is processed with natural gas is a main objection for environmentalists. "That's the crude's carbon kicker," he said.
{IOW words their objection is not about the transport mode but the production process itself. Unfortunately some have convinced themselves that not building the border crossing section of KXL with inhibit the production process. Given the record amount of oil sands production we have today obviously they’ve misunderstood the situation}
Refineries in the Gulf Coast and California currently refine oil from the oil sands, and Forrest said China could ultimately be able to handle a large amount of sands production given its aggressive plans to double refining capacity by 2030.
{And if you wonder how oil sands production has been getting to CA it’s been doing so through one of the other 6 pipelines crossing the US/Canadian border as well as by rail transport}
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