Price differential problem not leaving

From the Canadian Press

Two years after a blue-ribbon panel called on the Alberta government to encourage partial upgrading of bitumen from the oil sands to enhance value and free up more pipeline room for exports, the idea remains years away from commercialization.

In its royalty review report in January 2016, the panel led by ATB Financial CEO Dave Mowat pointed out that if heavy, sticky bitumen were partly upgraded, there would be less need to add light petroleum to dilute it so it will flow in a pipeline – meaning as much as 30 per cent more bitumen could be stuffed into existing pipelines.

It would also boost profits because companies wouldn’t have to buy diluent, which is generally priced in line with New York-traded West Texas Intermediate oil, the report said.

Diluted bitumen as represented by Western Canadian Select crude currently sells for considerably less per barrel than WTI, a discount that has doubled in recent months from typical levels due in part to pipeline capacity constraints. The wider differential means Alberta producers are missing out on hundreds of millions of dollars in revenue.

Last week, privately owned Fractal Systems Inc. announced that its Enhanced JetShear partial upgrading and acid reduction technology had proved – during a year of testing – its ability to improve bitumen quality, increase bitumen volumes shipped in pipelines and reduce overall greenhouse gas emissions.

“We’re now ready for commercial deployment and we’re hoping we’re hitting the market at just the right time,” said Fractal chairman Joe Gasca.

“An engineering study is now underway with our oilsands partner for a large-scale Enhanced JetShear facility. We should know more about the timing of an investment decision later this year.”

The company is partnering with oilsands producer Cenovus Energy Inc., aided by a $3.7-million federal grant approved in 2015 from Sustainable Development Technology Canada.

Cenovus is investigating several partial upgrading technologies for potential future investment, according to CEO Alex Pourbaix.

“We’re seeing some positive indications but I think we’re still in what I would call the R and D stage,” he said. “It isn’t something we’re going to be rolling out on a commercial basis in the short term.”


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