Alberta's Imminent Pipeline Capacity Dilemma


August 2017 - New pipeline approvals in Canada are an active discussion topic but have been mired in controversy. In late 2016, the Canadian federal government approved the Trans Mountain and Line 3 pipelines while simultaneously rejecting the Northern Gateway project. Meanwhile, the proposed Energy East pipeline remains in limbo.

Growing environmental concerns combined with civil society’s demand for increased involvement in the decision-making process are hindering new approvals. In contrast, the oil industry has voiced its concern that regulatory uncertainty is actively driving away investment.

This puts Alberta in a difficult situation. The opposing interests must be delicately balanced as they have very real consequences. If pipelines are approved too quickly, regulators and the Canadian government risk losing the confidence of their constituents from environmental stewardship and public trust perspectives. If pipeline approvals are too slow, this severely hampers Alberta’s ability to export its valuable resources to market and compete on a global level.

According to the Alberta Energy Regulator's ST3: Alberta Energy Resource Industries Monthly Statistics, oil sands production accounted for 83% of Alberta’s total crude oil production in 2016. Of that, approximately 62% took the form of raw bitumen, while the remainder was processed into synthetic crude oil within the province’s 5 upgraders.

The Canadian Association of Petroleum Producers (CAPP) released its annual Crude Oil Forecast, Markets and Transportation report in June 2017 that estimated Western Canadian crude oil production will grow to 5.4MMbopd by 2030. This growth was forecast to be driven heavily by the oil sands, which would undergo a 53% increase in production from today’s rates. The report also estimated that 39% additional pipeline capacity would need to be installed to bring the additional 1.5MMbopd of production to market.

Noting that Alberta’s upgraders are running near capacity, combined with the unlikelihood that any new upgraders will be built in the province for the foreseeable future, it can be reasonably assumed that CAPP’s production growth forecast from the oil sands would largely take the form of a raw bitumen product. Raw bitumen is a highly viscous substance. Current industry practice involves blending bitumen with a diluting agent (diluent) in order for it to be transported down a pipeline to feed refineries south of the border. The bitumen-to-diluent blending ratio typically ranges from 60:40 to 70:30.

When it comes to transporting petroleum to global markets, the decision-making process in Alberta to date has been sequentially reactionary, where experts: forecast additional capacity needs, consider the status quo and then propose to perpetuate the status quo. This is the 'more production, more pipelines' model.

The 'more production, more pipelines' model is predicated on the assumption that the current way of transporting petroleum is the most optimal path forward. But what if it’s not? Then, combine this question with the reality that environmental concerns and civil society’s demands are having a tangible impact on the approvals process, and you suddenly have a profound incentive to rethink your approach.

The solution to Alberta’s imminent pipeline capacity dilemma lies not in the province's ability to get new pipelines approved, but rather, rethinking how existing infrastructure can be better utilized. Alberta energy stakeholders need to start by asking the question: ‘what products should we send down our pipelines’?

As previously mentioned, nearly one-third of every barrel of diluted bitumen sent down a pipeline is occupied by diluent – a substance that significantly contributes to the cost of transportation. If diluent dependency was decreased, Alberta would realize increased effective carrying capacity in existing pipelines in addition to an array of other economic benefits. This would be a game-changer.

If the status quo is perpetuated, the next decade could be spent navigating through the rigorous new pipeline approvals processes with little-to-no progress. Alternatively, Alberta can take control of its destiny by rethinking the way bitumen is handled, thereby making better use of existing infrastructure.

About Well Resources


Well Resources is an Alberta-based technology company with local offices in Calgary and Edmonton. Its areas of focus are in the energy and life sciences sectors, where Well Resources develops and licenses green technologies that promote effective resource utilization.


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Well Insights is a series that addresses subjects relevant to civil society, governments, and industry. The discussions focus on rethinking the way we approach difficult issues and providing transformative solutions as they all relate to the topic of effective resource utilization.

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