CALGARY, Alberta, July 22 The Canadian crude oil
hubs of Hardisty and Edmonton in Alberta are embarking on a
major round of storage expansion that should boost capacity by
about 25 percent and provide more scope for trading oil sands
According to company data and estimates from energy
intelligence firm Genscape, the projects should add around 9
million barrels of capacity over the next two years.
In addition, TransCanada Corp will add an as-yet
undisclosed volume of storage capacity in Hardisty once it
greenlights a major eastern pipeline project.
Alberta's oil sands crude production is expected to nearly
double to 3.22 million barrels per day by 2020, from 1.8 million
bpd in 2012.
The lion's share of the new storage capacity - 6.6 million
barrels - will be built in Edmonton, where there are salt
caverns as well as above-ground storage tanks. Current capacity
is estimated to be around 11 million barrels, although Enbridge
Inc - the largest storage owner, according to industry
intelligence group Genscape - declined to give figures.
Traditionally the smaller of the two hubs, Edmonton is
attracting investment thanks to its proximity to refineries such
as Imperial Oil's 187,000 bpd Strathcona facility, and
pipelines running west to the coast of British Columbia, as well
as south to the United States.
Edmonton is the starting point for Kinder Morgan Energy
Partners LP's 300,000 bpd Trans Mountain pipeline, which
the company is proposing to expand to 890,000 bpd.
"Hardisty is essentially a junction of several export lines,
whereas Edmonton has more optionality because there are
refineries there," said Tony Mate, director of corporate and
investor communications at Inter Pipeline Fund, which
owns 75,000 barrels of storage in Hardisty.
Hardisty, a tiny town in east-central Alberta is Canada's
equivalent to Cushing, the main U.S. crude storage hub in
Oklahoma. Although there are no official figures available,
industry players estimate there is storage capacity for 20 to 25
million barrels of oil in the tank farms there.
It is a junction point on the Enbridge mainline and crude
volumes can also flow south on TransCanada Corp's 590,000 bpd
Keystone pipeline and Spectra Energy's 280,000 bpd
Express-Platte pipeline system.
TransCanada is planning to add to its 4.5 million barrels of
crude oil storage in Hardisty if open season on the Energy East
pipeline project goes well, company spokesman Davis Sheremata
said, although he declined to comment on how much.
The Energy East project is a plan to build a pipeline to
ship up to 850,000 bpd of Western Canadian crude to eastern
refineries, with a targeted end-2017 opening.
Most of the larger tank owners lease storage capacity to
other companies and industry players said the majority was used
by Canadian producers for operational purposes, rather than by
speculators trying to cash in on fluctuating crude prices.
Still, storage provides some security against volatility in
Canadian heavy crude, which sank to $40 per barrel below the
West Texas Intermediate benchmark in early 2013.
"It's a nice buffer between supply and demand when there are
conditions such as we have seen over the last year or two, where
supply is growing rapidly and demand is not," said Martin King,
analyst at FirstEnergy Capital in Calgary.
"For storage operators it has been a good gig."