Quote:
Originally Posted by burn_this_city
I'm not too broken up about KXL. Truth be told I've questioned it's necessity for the last couple of years. We have pipe going in the ground for both Line 3 and TMX, is there really a business case for another 800kbpd?
The age of major projects is probably behind us for good, I'm skeptical we're going to add more production where the additional takeaway is needed.
Industry is looking hard at reducing diluent requirements, that's where I see our incremental capacity increases happening going forward. We could add 1/3 more production if we eliminated diluent blending.
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Diluent is used to make the heavy oil more mobile within the pipelines, so it flows easier and has lower pressure losses. Without it the stuff would either not flow or require ridiculous pumps and many of them. The diluent has an extremely high recovery rate too. Thus, without at-source processing, the diluent is required to enable the heavy oils to reach downstream processing.
Also the big heavy-oil-specific plants down stateside are designed specifically for heavy oil. Since much of the Mexican and Venezuelan production has dried up, they still want to run at or near capacity. Therefore there is increased demand for Canadian oils.
Building these big pipelines is rarely a case of "build and they will come". The big economic analysis are very extensive, however they require a minimum commitment level prior to it even being feasible to start. So they get their contracts aligned a few years ahead based on this, and then look to incrementally fill the remainder of the pipeline with higher netback production. You can look online yourself for statements to this effect for KXL, TMX, and KAPS.