What Are the Alternatives to Oil Pipelines?

Over the past few years, the highly controversial Kinder Morgan pipeline has garnered global attention. Advocates assert that it will play a key role in boosting North America's oil and gas industry and will unlock an additional 590,000 barrels a day of capacity. In contrast, critics maintain that it poses an extreme threat to both the environment and local communities.

With Kinder Morgan's Trans Mountain pipeline expansion project recently grinding to a halt, it has oil sands producers looking at other options. TransCanada Corp’s Keystone XL pipeline and Enbridge Inc’s Line 3 expansion to Wisconsin are both possibilities, though neither have the capacity to simmer down Canada’s growing supply glut. Furthermore, neither will unlock access to Asia's coveted markets. The Canadian Association of Petroleum Producers also predicts that production growth will once again surpass pipeline capacity by the mid-2020s, which means Keystone XL and Line 3 are little more than temporary solutions.

A rail revolution

So is there an alternative to pipelines? The concept of a rail revolution is gaining momentum, with some experts predicting that Canadian oil producers are currently considering long-term commitments with transport companies like Canadian National Railway Co. and Canadian Pacific Railway Ltd. With the right approach, mass rail transport could help to reduce inventories, alleviate the pipeline bottleneck and improve oil prices, which plunged to the lowest levels seen in more than four years in late 2017.             

Slow and steady            

Small scale improvements are another option, with Enbridge, the operator of Canada's biggest oil export pipeline network, asserting that it could boost capacity by 500,000 barrels a day by making low cost, "minimal permit" expansions over the course of a few years.

Innovation could be one of the biggest game changers, with new technologies promising to make crude transport faster, easier and more efficient. Last month Alberta pledged to invest $1 billion in the construction of partial upgraders designed to lighten oil-sands bitumen and allow it to flow through pipelines without the need for diluent. Generally, diluents like light condensate or synthetic crude account for around one third of total volume. If the need for diluents could be cancelled out it would drastically increase pipeline capacity. There's also buzz surrounding the idea of transforming bitumen into solid pellets which could be easily transported via road, rail or sea.

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