By Robert Tuttle
Shipping bitumen to the Gulf Coast with little to no diluent can save a producer more than $6 a barrel versus shipping diluted bitumen, according to IHS Markit.
Canadian producers have long considered building diluent recovery units, or DRUs, to remove condensate from their bitumen and shipping more of it by rail. Now, a few companies are pushing ahead with the projects as plans to expand pipelines such as the Trans Mountain line to the Vancouver area and Enbridge Inc.’s Line 3 face repeated delays.
Cenovus plans to submit an application this quarter to build a C$800 million ($602 million) to C$1 billion DRU at its Bruderheim rail terminal, with plans to start construction within a year. The plant would process 180,000 barrels a day of diluted bitumen, stripping out 60,000 barrels a day that would be recycled back to oil-sands sites.
Gibson Energy is working with its partner USD Group LLC. to secure commercial support for a DRU at its Hardisty, Alberta, terminal and is “well advanced” on a commercial agreement with one customer for a portion of the first 100,000 barrels a day required for phase one, Steve Spaulding, chief executive officer, said in an Nov. 5 investor call.
“We are currently working to secure customer commitments for the project; and sanctioning will be dependent on those commitments,” Brian Radiff, Gibson spokesman, said in an email. Construction will take about 18 months with the plant operational as early as the second quarter of 2021.
The pipeline shortage that emerged last year, sending local oil prices tumbling to the lowest in a decade, prompted companies to sign up for long-term rail contracts, said Kevin Birn, IHS Markit’s director of North American crude oil markets. That “taught producers they need to invest in flexibility to ensure they can maximize value of their product,” he said.
Still, shipping undiluted crude by rail is more logistically challenging, requiring special heating equipment and possibly designated tanks at the receiving terminal, Birn said. Rail cars must be insulated with heating coils.