Tuesday , August 3 2021

Oil sands companies are considering dilution recovery units to increase crude oil by rail volumes

The ongoing project delays and growth in crude-by-rail capacity from western Canada are leading oil sands manufacturers to consider spending billions of dollars to build dilution units for recycling.

Oilsand's bitumen is a thick, sticky oil that must be diluted with about half as much light petroleum to flow into a pipeline, but diluent is not necessary for rail transport as the product can be heated for loading and unloading.

Building dilution recovery units at Alberta railway terminal terminals would yield approx. a third more space for bitumen in the railroad to improve efficiency and profitability by using rail to supply refineries in the southern United States, Eight Capital analyst Phil Skolnick said in a published report Friday.

“DRUs can in some cases yield attractive returns, but more importantly, they can also improve the landscape by raw-by-rail and exit (to a size of approximately 190,000 barrels per day, incremental bitumen, if all 600,000 bpd of raw railroad capacity used a DRU), ”he said.

“However, reduced costs and maximum dilution recovery are key to this effort. These current hurdles are probably reasons why companies are not busy building them yet. "

READ MORE: Raw-rail and container traffic pushes CN Rail to record revenue of nearly $ 4B

Sending more bitumen by rail would free up space on export oil pipelines, he added, helping to relieve a power of trapped oil in Alberta, leading the province to impose production restrictions this year after price rebates rose last fall.

Sending undiluted or "neat" bitumen would also improve safety because, unlike the diluted product, it is not considered highly flammable, Skolnick pointed out.

Cenovus Energy Inc. is investigating the construction of a recovery unit at its railroad terminal near Edmonton, which would cost between $ 800 million and $ 1 billion, CEO Alex Pourbaix told The Canadian Press in a recent interview.

It would be able to process up to 180,000 barrels per day. Day diluted bitumen and recover approx. 60,000 barrels per Day diluent to be returned to Conovu's Northern Alberta oil sands projects for recycling, he said.

“Right now, about a third of the volume of each tanker of oil we ship is absorbed by diluent, and that diluent actually has a cost to us, it has no value. If we could … move pure bitumen, it would effectively reduce our freight costs by over a third, making railroad movement of oil much more economical, ”he said.

“On top of this, the right bitumen is generally a much more attractive raw material for our refining customers at the other end of the line. We believe there may even be a premium value associated with removing that diluent. "

An investment decision is likely several months away and will depend on how the proposed pipeline project plan runs, Pourbaix said. Cenovus has promised an update on the proposal on its investor day in October.

Rival oilands manufacturer Imperial Oil Ltd. considered building a dilution recovery unit in the Edmonton area in 2015, but decided against it based on its high construction costs and market uncertainties, CEO Rich Kruger said in a recent conference call.

"We look at some of these key assumptions," he said. “I would never say never. But right now it's not a front-burner option for us. "

Oilsands manufacturer MEG Energy Corp. is also looking at recovering diluent, but has not committed to an investment, CEO Derek Evans said at a recent conference call.

“Diluents are a huge part of our business. And then we continue to investigate DRUs, but we also look very clearly at the kind of technologies that we could use to reduce the amount of diluent we need, ”he said.

MEG has previously proposed using a partial upgrade technology that would remove heavier components in a bitumen barrel and reduce the amount of diluent needed for transport.

Source link