As someone interested in evidence-based decision-making there are few topics as frustrating to discuss as the Trans Mountain Pipeline Expansion (TMX) project. The reason for this is that the media landscape is so completely full of misinformation and bad information that evidence-based decision making is almost impossible. This weekend I had an extended discussion with an independent podcaster about the project after listening to him in a radio segment with Lynda Steele on CKNW.
The segment had so many errors that I sent out a number of intemperate tweets in his direction. His response was to present a number of media stories that served as the basis for his opinions. The problem was that most of these stories were full of errors. Therein lies the dilemma. There is so much bad information out there that even well-meaning observers are going to get it wrong. Between the bad information he was being fed in media stories, and the deliberate misinformation being spread by opponents of the project, it is virtually impossible for the regular observer (i.e this podcaster) to know what is right and what is wrong. This post will look at a few more of these myths.
As I discussed in my previous post, the TMX has two major components:
- Line 1 – existing pipeline segments (with pump upgrades) able to transport 350,000 barrels/day (bbl/d) of refined petroleum products and light crude. It has the capability to carry bitumen but at a much reduced volume per day.
- Line 2 – a new pipeline with a capacity of 540,000 bbl/d. It is intended to transport heavy crude oil.
Line 2 is about moving heavy oils including diluted bitumen and synthetic crude. Line 1 is intended to help mitigate the supply bottleneck that has Vancouver drivers paying such high prices for gasoline and diesel while supplying the light crude needed by the Parkland Refinery in Vancouver and US refineries in the Puget Sound.
Admittedly Line 1 could be used for heavy crude but even a little bit of heavy oil in Line 1 eliminates the benefits of the upgraded Line 1. Meanwhile Alberta recently completed the Sturgeon refinery and now has a glut of diesel. As such, it makes logistical and financial sense to operate the pipeline in the manner consistent with the NEB proposal which means that Line 1 will almost certainly be used for what it was intended: light crude and refined fuels. Now let’s deal with the misinformation.
Diluted Bitumen – what is it?
The name: “diluted bitumen”, when enunciated syllable-by-syllable by Dr. Andrew Weaver, sounds a lot like a chemical warfare agent. The truth is entirely the opposite. Diluted bitumen (dilbit) is pretty boring stuff that consists of a mixture of 20% to 30% diluent and 70% to 80% bitumen.
Bitumen is a type heavy oil. It is characterised by high viscosity, high density (low API gravity), and high concentrations of nitrogen, oxygen, sulphur, and heavy metals.
The diluent is typically a light-hydrocarbon mixture (like naptha) called “condensate”. The condensate has a specific gravity in the 0.6 g/mL to 0.8 g/mL range.
The resultant dilbit has an API of 20-22 (medium crude is API 22.3 – 31.1 so dilbit is almost a medium crude in API) and a sulfur in the 3.7% -3.9%. Dilbit has density/specific gravity that ranges from around 0.92 g/mL to about 0.94 g/mL. Since we know that freshwater has a density of 1 g/mL and that seawater density ranges from 1.025 g/mL to 1.033 g/mL that means that when spilled any dilbit will initially float.
Chemically, dilbit acts and behaves just like any other heavy, sour oil. Maya is the most comparable crude to typical Alberta dilbit (called WCS). Maya is a Mexican heavy crude that ships out of the ports of Cayo Arcas and Salina Cruz on the Gulf Coast. It has an API of 22 and sulfur of 3.5%. Thus WCS and Mata are both low API blends with less than 5% sulfur.
The thing to take from this section is that dilbit is not some strange creation or unusual mixture. From a chemical perspective it is unspectacular. It looks like a heavy crude oil, it reacts in a refinery like a heavy crude oil and when shipped or spilled behaves almost exactly like a heavy crude oil.
How is bitumen extracted.
Bitumen can be extracted using two methods depending on how deep the deposits are below the surface: in-situ production or open pit mining.
As described in Natural resources Canada Crude oil facts open pit mining represents 45% of current production and 20% of oil sands reserves. In 2017, seven mining projects in Alberta produced approximately 1.25 million barrels a day:
In Situ methods represent 55% of current production and 80% of the total resources. There are about 20 in situ projects in Alberta. In in situ extraction the bitumen is treated in a manner that allows it to flow to be collected. Generally, the three methods that can be used to reduce the viscosity of the bitumen are the addition of steam, solvents, or thermal energy. The biggest benefit of in situ extraction is the lack of above-ground impacts. There are no tailings ponds and the sands are all left underground.
As described by NRC Canada water management is a key challenge of the oil sands extraction process. The mining method uses 2.5 barrels of fresh water per barrel of bitumen and the in situ method uses an average of 0.21 barrels of fresh water per barrel of bitumen. Oil sands producers recycle around 80-95% of the water used in established mines and approximately 85-95% for in situ production.
Is Dilbit particularly dirty?
Let’s be clear here, heavy crude oils are not something you use as a comfort food for a toddler or to bathe puppies. That being said, heavy oils are an essential commodity and bitumen is not a particularly dirty form of heavy oil. Recent studies by California’s Environmental Protection Agency, Air Resources Board for their Low Carbon Fuel Standard made the following findings:
- There are 13 oil fields in California, plus crude oil blends originating in at least six other countries, that generate a higher level of upstream greenhouse gas emissions than Canadian dilbit blends;
- Crude oil from Alaska’s North Slope, which makes up about 12 per cent of California’s total crude slate, is actually “dirtier” than the Canadian dilbit known as “Access Western Blend”;
- The “dirtiest oil in North America” is not produced in Canada, but just outside Los Angeles, where the Placerita oil field generates about twice the level of upstream emissions as Canadian oil sands production; and
- The title of “world’s dirtiest oil” goes to Brass crude blend from Nigeria, where the uncontrolled release of methane during the oil extraction process generates upstream GHG emissions that are over four times higher than Canadian dilbit.
As for the claim that the oil sands are the most expensive oil, that dubious title likely goes to the Kashagan oil field in Kazakhstan but it certainly doesn’t go to oil sands oil most of which can be produced at very reasonable costs.
Spills – We know what to expect
Contrary to claims by critics, we know a lot about how to handle diluted bitumen spills. During the original NEB hearings a lot of organizations made hay over the lack of specific knowledge about dilbit spills. As a consequence the federal government spent almost $50 million to study the topic. Transportation Canada prepared a summary of the latest research as did Fisheries and Oceans Canada.
Their conclusions were that dilbit behaves almost exactly the same as other heavy crude oils in spills and that the technologies that we currently rely on to address heavy oil spills would work equally well on diluted bitumen. So when Dr. Weaver tells a reporter about an old Royal Society of Canada Report, the correct response should be to point out that a lot of much newer information now exists and that the report is no longer a particularly useful resource on this topic.
Refining Heavy oils
It is true that heavy oils can’t be effectively refined in a lot of refineries. Rather heavy oil needs to be refined in specially designed and built high-conversion refineries.
Heavy crude oil refineries will include very expensive cracking and coking units, designed to break down the long chain hydrocarbons into the smaller hydrocarbons used in gasoline, kerosene and diesel. Unfortunately, the simpler light crude refineries don’t typically have these cracking and coking units. Ironically, this can mean that the light crude refineries can’t handle the heavier components in the light crude oils and so the refineries end up producing more undesirable byproducts (like petroleum coke) per barrel of input.
What this means is that the heavy oil refineries produce more gasoline/diesel/kerosene per barrel of heavy crude oil than the light refineries do per barrel of light crude oil and the heavy refineries produce a lot less waste petroleum coke per barrel as well.
In financial terms, the heavier crudes produce much higher margins per barrel of input than their lighter crude cousins and generate less waste byproduct that have to be disposed.
Because of these factors the owners of heavy oil refineries will pay a premium to get heavy oil to use in their very expensive high-conversion refineries.
Asian Refining Capacity
One of the most bizarre recent naratives is that there is no market for diluted bitumen in Asia and that Asian refineries can’t refine dilbit. This is entirely untrue. As Reuters recently reported:
Many of the region’s refineries are new and are optimized to process heavy and sour crudes.
They were designed this way to take advantage of the historical discount these grades were priced at relative to light, sweet crudes, such as global benchmarks Brent and West Texas Intermediate (WTI), and oil from West African producers such as Nigeria and Angola.
The recent developments in the crude oil market have all but eliminated the discount enjoyed by heavy crudes, and in some cases, physical cargoes of some heavy grades have traded at premiums to light crudes.
So, contrary to what the folks at the Canadian Press or David Anderson have to say Asia has a lot of refineries that can refine heavy oil. Want some numbers? According to GlobalData’s report on Chinese refining capacity:
The country’s total coking capacity, catalytic cracker capacity and the hydrocracking capacity is expected to increase during the outlook period. The total coking capacity is expected to increase from 1,991 mbd [thousand barrels per day] in 2018 to 2,371 mbd in 2023. China’s total catalytic cracker unit capacity is expected to increase from 4,359 mbd in 2018 to 5,532 mbd in 2023. Over the five year period, the hydrocracking unit capacity of the country is set to increase to 2,922 mbd from 1,846 mbd.
Look at those numbers. The Chinese refineries can refine all the bitumen Alberta currently produces and can handle over 8 times what Line 2 of the TMX can send to Westridge Marine Terminal for export. This is why Asian refineries are buying up all the heavy they can get, often at a premium over lighter crudes. Consider that on June 13th (when I last looked it up)
- Maya (the chemical twin to land-locked Alberta WCS) for export to Far East was selling at $51.16/bbl.
- WCS (the Canadian heavy oil used to represent Alberta heavy) was $39.19/bbl and
- West Texas Intermediate $48.96/bbl.
The high sulfur, heavy oil was selling at a premium over the lighter crude and Alberta was losing almost $12/bbl of value because its oil was land-locked. It doesn’t take a PhD in Economics to know that if the market is paying a premium for a product then clearly someone wants that product.
Asian Demand for Heavy oil
The most ridiculous recent story coming from the activist community is that there is no demand for heavy oil in Asia. Why do I say ridiculous? Because according to data supplied to Business in Vancouver by Statistics Canada.
7.5 million barrels of Alberta crude shipped to Asia via Westridge Marine Terminal in 2018, with a total value of $539 million.
China took 6.3 million barrels, at a value of $442 million. Another 648,000 barrels went to South Korea ($51 million) and 508,000 barrels went to Hong Kong ($46 million). A small amount also went to Thailand.
Coincidentally last week Reuters reported:
The tanker New Dream, chartered by commodities trader Mercuria Energy Group, departed on June 16 from Galveston loaded with more than 1 million barrels of heavy Canadian crude, and is headed to Asia, according to vessel tracking data from Refinitiv Eikon and ClipperData.
Another 3 million barrels of Canadian crude are due to be exported from the Gulf Coast by June 30, according to an oil trader familiar with the matter. Their destinations could not immediately be learned.
Ironically, on the same day the activists were claiming that no Asian economies want our heavy oil a tanker from Korea tied up at Westridge Marine Terminal to take on a load of heavy oil to one of their refineries.
Asian refineries are doing everything in their power to get Alberta heavy crude. They are even buying material that has been shipping all the way to the Gulf Coast and then shipping it half-way around the world. The activist narrative is simply false.
So here we have it. Less than a week after I wrote a 2000 word post on Trans Mountain myths I have another 2000 words debunking more myths. It is almost impossible to keep up with the false narratives. What is worse is that many of the newer ones represent journalists repeating misinformation that has been fed to them and that they had been unable/unwilling to confirm via other sources. The problem is that the statements like there being no refining capacity for heavy oil in Asia can be debunked with five minutes of research on Google.
Thanks very much for this info. Great read.
Thank-you. Great work!
Well assembled. Thanks for this.
The Kalamazoo mess created by the Enbridge spilll is often referred to vis-a-vis the potential for a calamitous offshore spill. Given that dilbit floats this seems anomalous. The issue in Kalamazoo was high solids load in the water due to heavy runoff. Bitumen coats solids and is dragged to the bottom by them. This is, of course, not an issue is seawater as the solids load is generally extremely low. Dilbit will float for 10 days or so in fresh water and probably indefinitely in seawater.
Actually the solids load off vancouver is high in spring and summer from Fraser River runoff.
Excellent job debunking the false narratives out there, Blair. Your column is always a concise and cogent summary and response to the absurd narratives being trumpeted about TMX and the oil & gas industry. In a previous column you had commented on your concerns about representing the facts in a meaningful and un-ambiguous method, as your credentials as a scientist could be challenged by the governing society and the province. How does our society respond to activists that continually and willfully keep mis-representing the information. Should we be able to censure someone repeatedly telling what amounts to lies about the project. Should Andrew Weaver be stripped of his credentials and position for repeating mis-information, or is he just another one of what Vivian Krause termed as the “useful idiots”?
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Thanks Blair. Jason Kenney could use your expertise in the “war room “.
A “war” Kenney is losing needs no further help. Since his election the price of WCS has fallen dramatically and with corporations and investors fleeing Alberta it would take more than a thumb in the dyke to prevent what’s eventually coming to the Bitumen Fields. Kenney will blame Trudeau though, but it was Trudeau who purchased a pipeline no smart investor wanted, not even the Alberta government. Kinder Morgan Canada couldn’t raise sufficient investor funds for the expansion proposal and its parent company wouldn’t even pitch in. Not even RBC, the oil industries favourite bail-out white knight, would plunk down financial assets. Had Alberta worked together with Canada in developing a National Energy Strategy they’d be further ahead and not saddled with $66 billion in debt and two more years at least of deficits and more debt. Their victim complex has been their own enemy and still is.
Another great read by someone who has “looked at the data”!!!! Thanks Blair
Look again, only 8 shipments of tankers from Vancouver ports to China in 2018 and so far only 4 shipments this year. The bulk of any further expansion of diluted bitumen crude will overwhelmingly go to the US as it always has. Washington and California refineries will be starving for crude as Alaska crude dwindles and this is where any expanded production will go if there is a pipeline built to Vancouver’s port. There is no way any crude oil pipeline will get built through Washington and California. They can’t even get Keystone XL built through ‘friendly’ states even with a ‘friendly’ POTUS at the helm.
Canada has complicated reasons as to why it ships so little oil to China. you can bet if it was left to China to make happen it would be massive and unstoppable.
On first glance this is a good summary of diluted bitumen and comparison to other heavy oils. However, there are no references, no footnotes to your claims.
For example, the California EPA studies. Why not list them exactly to your claims of upstream GHG, dirtiest oil of NA, etc.?
You have to show evidence.
I’m sorry but you are wrong, the California study is cited. It is all at the original link.
OK. I am looking for the study to one of the findings.
“There are 13 oil fields in California, plus crude oil blends originating in at least six other countries, that generate a higher level of upstream greenhouse gas emissions than Canadian dilbit blends;”
Where would I find the study that backs up this finding?
BTW: This link “Recent studies by California’s Environmental Protection Agency, Air Resources Board ” points me to a website, not the particular study that I am looking for.
This from that link https://ww3.arb.ca.gov/fuels/lcfs/crude-oil/2017_crude_average_ci_value_final.pdf
and here is the section from their website https://ww3.arb.ca.gov/fuels/lcfs/crude-oil/crude-oil.htm
Those spouting their false narratives, such as David Anderson the useless former Liberal Cabinet minister on BNN today don’t cite references for their false information that there’s no market for Dilbit in Asia. He’s also falsely claiming the TMX is uneconomic. Why then would have producer shippers signed up in advance for 80% of TMX capacity? Further, Dilbit is currently selling in the U.S. Gulf Coast at a premium to WTI. TMX will always be cheaper than rail, so the economics are not threatened.
I’d like to know where you found specific signed legal documents showing shippers precise commitments. Remember, Kinder Morgan never announced their final financial decision to go ahead and instead Trudeau and Morneau stepped in and bought the present line and proposal for $4.5 billion. Kinder Morgan Canada could not find sufficient global investors to lure RBC into the deal. And, since December 2018 Western Canada Select has been selling at a discount. In fact none of Canada’s conventional crude blends have sold higher than WTI.
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You state: “The biggest benefit of in situ extraction is the lack of above-ground impacts.” This is not true. Having been present at two of the largest in situ productions in NE Alberta I can say without a doubt the overall impact by hectares has significant impact above ground. Deforestation to make roads, dig pipelines, interrupt surface water and pads themselves has far more impacts than you have suggested. I would suggest taking a look at Google satellite and begin calculated the areas disturbed above ground at all in situ operations. In fact Cenovus operations near Cold Lake should be the first place you look. Also there are impacts from fugitive GHG emissions from below ground disturbances which have been underestimated by in situ producers. And since you didn’t publish my previous comments I have my concerns about your impartiality and information provided here.
Blair, as you and several others have pointed out before (Terry Etam’s Blog Public Energy Number One), there is not enough time in the world to debate with people about energy footprints and the role that fossil fuels provide to enable a lifestyle that supports so many people. PWLG fails to understand that everything we do has an impact, and critically reviewing InSitu infrastructure and complaining about their impact ignores the thousands of hectare’s of land undisturbed or remediated, especially compared to an oilsands mine. If it can’t be grown, it has to be mined, and our society would collapse without the use of reliable energy sources, and to the billions trying to survive in the world, the catastrophic warnings with no realism to accepting nuclear as a viable alternative ignore basic energy economics. Most live in ignorance of where their power/food/items actually come from and how they get to their local store, and when faced with increased costs, always want to blame the evil corporations and malfeasance of government, when in fact it is we who drive consumption, and I prefer to be able to benefit from safe, reliable energy supplies to heat my house, drive my car and provide power to the hospitals, schools and infrastructure of our lives.
If you would like a detailed report on tankers attending the Westridge Marine Terminal from 2011 to the present please send me an e-mail. In case you are curious, no tankers have loaded in the past two months, and only 9 have loaded so far this year. email@example.com
The Asian market is being well served by producers in Russia and Iran. Since no tankers are coming up the inlet (I live on the inlet in a float home) I think that expanding the TMX at cost to the taxpayer is not beneficial.
Why do you think the TMX is at a cost to the taxpayer? Enough roadblocks put in place for an already (mostly) permitted route to twin an existing almost 70 year old pipeline, forced the Federal government to step in to purchase the project after bungling consultations and approvals from their own departments. When the project is completed, Canada will get its payments, similar to the federal government share of the Hibernia offshore project. The continual protests and roadblocks are making Canada unfriendly towards any development and improvements that benefit the residents and taxpayers.
David, I’m looking at the $4.5 billion purchase price as a cost to the taxpayer, ‘roadblocks’ aside. No tankers = no reason to increase pipeline capacity. What would the expanded capacity serve? I’m not against exporting oil; I’m against propping up a business model with unneeded extra capacity. Since we own the pipeline, we’d be paying for the additional piping, wouldn’t we? Or do we have a corporate partner willing to fund the project? This from ‘Maclean’s;’
“The plan for building the pipeline calls for Kinder Morgan to resume construction immediately, with the borrowing the company must do to cover costs now backstopped by an Export Development Canada loan guarantee.
There is a long-shot chance that a private-sector buyer might emerge between now and the deadline of July 22, set by Houston-based Kinder Morgan, in which case that new owner would take over construction.” From May 2018.
Kinder Morgan is just now selling itself to Pembina. I think the Kinder Morgan option is dead at this point. This whole idea stinks.
Economics 101 – Law of Supply and Demand
The $10 differential between Maya and WCS will decline with increased export of WCS to Asia. So while it is true that some price increase would be realized, it is misleading to suggest that it could be as high as $10. A rough approximation might be to weight the prices with the proportion of oil from each source since the two heavy oils are undifferentiated commodities.
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