August 8, 2016- Housley Carr, RBN Energy- In the past century and a half, Sarnia, ON has evolved into one of Canada’s leading refinery and petrochemical centers, and a major consumer of Alberta and Bakken crude and Alberta and –– more recently –– Marcellus/Utica natural gas liquids. Getting that oil and those NGLs to southwestern Ontario is the task of a small group of pipelines and a few rail facilities; other pipelines out of Sarnia help to move refined petroleum products to nearby demand centers. Today, we continue our comprehensive review of refinery and petchem-related infrastructure in and around Ontario’s Chemical Valley.
As we said in Part 1 of our series, Sarnia was present at the creation of the North American oil industry –– an 1858 well in nearby Oil Springs, ON is said to have been the first on the continent, beating Col. Edwin Drake’s (of course) more famous well in Titusville, PA by a year. Over time, oil-production, refining and petchem infrastructure was developed in southwestern Ontario (as were pipelines and railroads), and Sarnia’s role as a major refining/petchem player continues to this day, decades after most oil production in southwestern Ontario dried up. Since what Americans hear about Canada sometimes seems to go in one ear and out the other, we’ll remind you that Sarnia is along the St. Clair River near the southern tip of Lake Huron. There are currently three refineries in Sarnia’s Chemical Valley with a combined capacity of about 277 Mb/d: Imperial (121 Mb/d; pink area along upper part of the St. Clair River in Figure 1), Suncor (85 Mb/d; light purple area just downstream from Imperial), and Shell (71 Mb/d; red area downstream from Suncor).
The crude refined in Sarnia comes primarily from two sources (Alberta and the Bakken) and is delivered to Sarnia by two Enbridge pipelines: the 540-Mb/d Line 5 (medium blue line in upper left of Figure 1), and the 500-Mb/d Line 78. Line 5 is a 645-mile, 30-inch-diameter pipeline that runs from Superior, WI (near the western tip of Lake Superior) across Michigan’s upper and lower peninsulas (its flow splitting into two 20-inch-diameter pipelines under the Straits of Mackinac) and then across the St. Clair River into Sarnia. Line 5 transports light oil and NGLs from Alberta in batches (see Refined, Piped, Delivered –– They’re Yours for an explanation of how batching works). Line 78 (pink line in lower left of Figure 1), meanwhile, moves light, medium and heavy oil (from the Bakken and Alberta) in a 30-to-36-inch-diameter pipe (formerly known as Line 6B) 273 miles from Griffith, IN to a terminal and tankage in Stockbridge, MI, and from there to Sarnia. The pipeline tariffs for moving oil from Alberta and the Bakken to Sarnia are generally in the $4-to-$6/bbl range, and it’s important to note that not all the crude that flows to Sarnia stops there. There are two other Enbridge pipelines –– the 180 Mb/d Line 7 (brown line in upper right of Figure 1) moves light, medium and heavy oil from the end of Line 5 in Sarnia to Enbridge’s Westover, ON terminal. From there it can flow on Line 10 to the Kiantone Pipeline in West Seneca, NY or on Line 11 to Nanticoke, ON. The other Enbridge pipeline out of Sarnia is Line 9 (orange line in upper right), which can move up to 400 Mb/d through Westover to Montreal, QB. (Line 9 until recently flowed east to west, but its direction was reversed to allow more Alberta and Bakken crude to flow eastward –– see Come On the Sloop 9B.)
Each of the three Sarnia refineries is different from the others. Imperial, for instance, is a relatively complex refinery (more bells and whistles) with a crude slate that is about 65% Western Canadian Select (WCS) and 35% Western Canadian Heavy Sour. The refinery had processed some Eastern Canadian Sweet and imported sweet –– in this case meaning oil shipped to eastern Canadian docks –– as recently as 2014, but stopped that when the flow on Line 9 was reversed to west-to-east. Imperial’s liquid product yield in 2015 was about 31% diesel, 24% gasoline, 13% kerosene/jet fuel and 13% fluid catalytic cracking (FCC) gasoline intermediate; the rest is a mix of olefin intermediates (6%), naphtha intermediates (5%), liquefied petroleum gas (LPG, mostly propane with some butanes; 4%), and aromatics (2%). (The Imperial refinery suffers from low light oil product yield due to the lack of gasoline hydrotreating and alkylation capacity.) Meanwhile, about 75% of the Suncor refinery’s feedstock comes from the Alberta oil sands, and the Shell refinery’s crude slate is all WCS. Shell is a low-complexity refinery whose highest value products made up 84% of its total liquid volume yield in 2015 –– 40% gasoline, 36% diesel, 4% aromatics and 4% kerosene/jet fuel. Another 10% of the yield is heavy fuel oil, and 6% is LPG. One thing all three of the Sarnia refineries have in common is that their utilization rates are high –– higher than the averages for all Canadian refineries and for U.S. refineries in Petroleum Administration for Defense District (PADD 2; the Midwest and upper Great Plains). Some of the refined petroleum products that come out of the three refineries serve the local area, and much of the rest is piped to Toronto (and smaller cities and towns along the way) on one of three product pipelines with a total capacity of 213 Mb/d. These include two Sun-Canadian pipelines (one 8 inches in diameter and the other 12 inches; green line in Figure 1) whose combined capacity is 120 Mb/d; these pipelines are owned by a joint venture of Suncor and Shell. The third pipeline is Enbridge’s 93-Mb/d Line 8, which is under long-term lease to Imperial’s Sarnia refinery. The pipeline tariff for Line 8 (yellow line in Figure 1) is estimated at 34 cents/bbl (based on Imperial’s monthly lease payments to Enbridge); a tariff for the Sun-Canadian pipelines is not available due to the proprietary nature of the lines. (There is also an intermediates pipeline that connects the Imperial refineries in Sarnia and Nanticoke, the latter of which processes heavy FCC gasoline and butylene produced at Sarnia.) We should note that the three Sarnia refineries benefit from refined-product price premiums relative to the Chicago market.
To finish up our look at the pipelines serving Sarnia’s refining sector, let’s take a quick look at a handful of crude pipeline projects that would give Imperial, Suncor and Shell even more access to Alberta and Bakken crudes. These include TransCanada’s Energy East project, which would convert elements of the company’s natural gas-moving Canadian Mainline to crude service (proposed capacity, 1.1 MMb/d). Whether Energy East will win the approvals it needs remains to be seen; TransCanada’s hope is to complete the project in 2019. Then there’s the Dakota Access Pipeline (DAPL; see With or Without You), a 450-Mb/d, 1,168-mile, 30-inch-diameter greenfield pipeline that will run from the heart of the Bakken in western North Dakota (then across South Dakota, Iowa and southwestern Illinois) to Phillips 66’s Patoka, IL refinery. DAPL finally has all its regulatory approvals and permits in hand, and the project’s prospects brightened a few days ago (August 2, 2016) when Enbridge and Marathon Petroleum agreed to acquire nearly half of Energy Transfer Partners/Sunoco Logistics’ 75% stake in the Bakken Pipeline System (BPS, whose other owner, with a 25% stake, is Phillips 66). BPS includes not only the planned DAPL line to Patoka but the Energy Transfer Crude Oil Pipeline (ETCOP) project, a planned $1 billion reversal of an existing 30-inch-diameter natural gas pipeline known as Trunkline (plus 66 miles of new pipe) that will connect Patoka and Energy Transfer Partners’ crude terminal in Nederland, TX. ETCOP doesn’t concern us today (it will move crude to the Gulf Coast), but DAPL does, because Bakken oil piped to Patoka on it could flow east/northeast on the Enbridge system to Sarnia. The newly announced investments in DAPL by Enbridge and Marathon probably means the demise of another Bakken-to-market project –– Enbridge’s proposed 616-mile Sandpiper Pipeline from near Tioga, ND to Enbridge’s crude terminal in Superior, WI. From Clearbrook and Superior, Bakken crude could be transported by Enbridge and other pipelines to refineries in the Midwest and eastern Canada, including Sarnia. Look for DAPL to be completed late this year (2016) or early in 2017, and for Sandpiper (whose anchor shipper was none other than Marathon) to bite the dust soon.
In our next episode, we’ll look at the NGL side of the Sarnia story –– pipelines, rail, storage, fractionation capacity, the works! We think you’ll agree it’s an interesting tale, one whose chapters are still being written as new pipelines are built and as NOVA Chemicals’ 1.8-billion-pound/year ethylene plant (also known as a steam cracker) prepares to fully wean itself off naphtha in favor of NGLs.
Original Article on RBN Energy Website
Posted in: Headlines