Oilsands face pipeline space shortage

Energy; Oil bubble expected to swell; Frantic work to bolster networks, build new ones;

CALGARY – A new problem is bubbling in Canada’s growing oilsands industry: too much oil and not enough pipeline space to move it.

Production from the deposits is growing so much, so fast, producers and pipeline companies are looking for ways to mitigate the impact of an oil bubble expected to swell by November and last for as long as 18 months.
The likely short-term fixes: periods of pipeline rationing, shut-in production, oil put in storage.

Meanwhile, oil prices in Canada could weaken relative to those in the United States until more space unplugs the bulge.

“Every year we are forecasting increased production, and there hasn’t been a lot of pipeline expansion recently, and now it just gets more urgent,” said Colette Craig, oil market analyst at the National Energy Board. Pipelines are already full, and “in the next year to 18 months it could become a bigger problem.”

Forecasters predict Canadian oil volumes will increase 8% this year alone, to approximately 2.8 million to 2.9 million barrels a day. By 2020, oilsands growth is expected to propel Canada’s overall production to between 4.6 million and 5.3 million b/d.

Pipeline companies are working frantically to bolster existing networks and build new ones. By 2010, an additional 1.3 million b/d of additional capacity is expected to be available to the West Coast, the U.S. Midwest and Ontario.

Financial Post