In their quest to make one of the costly strategies of manufacturing crude extra worthwhile, Canada’s oil-sands firms have been ramping up efforts to get their thick bitumen to circulation via pipelines extra simply and cheaply.

MEG Energy threw a highlight on these efforts on Tuesday, when it stated that it’s working with a monetary adviser on strategic options for its HI-Q partial upgrading know-how. The firm is betting that there could also be a profitable marketplace for the strategy, which cuts out the necessity for expensive diluting brokers that take up treasured pipeline house.

Producers within the prolific oil sands — the world’s third-largest petroleum reserves — usually use pure gasoline condensate to show their sticky heavy crude into one thing pipelines can carry. While a lot of it’s produced from Alberta and British Columbia’s Montney shale formation, some diluent is imported from the U.S. as effectively.

That condensate tends to commerce on par with the worth of sunshine, candy West Texas Intermediate and even at a premium to that grade, which itself trades at a premium to Western Canadian Select heavy crude.


And to circulation via a pipeline, bitumen must be about 30% condensate.

Technology to scale back these necessities would go a good distance towards making the traditionally expensive oil-sands extra aggressive, and it might unencumber the pipeline house that has develop into so scarce that the Alberta authorities wanted to mandate province-wide oil-production cuts.

“The elimination of that diluent clearly wouldn’t solely impression the underside strains of producers, but additionally might enhance total market sentiment in Western Canada, given the pipeline-access points,” stated Dinara Millington, vp of analysis on the Canadian Energy Research Institute.

MEG says its HI-Q know-how permits bitumen to be shipped via pipelines with out mixing with lighter hydrocarbons. The know-how employs a course of that entails eradicating and recycling some diluent utilized in its preliminary processing, separating out the lighter and heavier parts of the bitumen, then eradicating stable supplies often called asphaltenes.

But it’s not the one firm working a diluent-cutting know-how. Cenovus Energy Inc. stated in October that it was engaged on a 1,000-bpd pilot plant utilizing a technique that would cut back its diluent wants by half. Husky Energy is engaged on a 500-bpd pilot plant for its diluent-reduction know-how at its Sunrise oil-sands venture close to Fort McMurray. The firm has stated the method has the potential to chop diluent necessities by half.

“The greatest hurdle is transferring that pilot part into the industrial part and demonstrating the dimensions,” Kevin Birn, IHS Markit’s director of North American crude oil markets, stated in an interview. “That first mover would clearly have a bonus to then step out from that plant and herald different producers on joint-venture or operational foundation.”

Alberta’s authorities is also getting in on efforts to improve the province’s crude. Premier Rachel Notley on Tuesday introduced the province is extending a C$440 million mortgage assure to Value Creation to encourage its development of a C$2 billion partial upgrader, which might flip 77,500 bbl of diluted bitumen a day into higher-value merchandise like medium artificial crude and ultra-low-sulfur diesel.

The results of decreasing or eliminating diluent wants might finally ripple past the oil sands. Already, the expansion of condensate manufacturing in Western Canada has trimmed the necessity for U.S. imports, and diluent-reducing applied sciences might speed up that pattern. However, that could possibly be a good distance off, because the know-how nonetheless must develop, and huge, commercial-scale services would take time to construct, Birn stated.

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