Oil exports to Asia drive expansion plans at B.C. ports in Vancouver and Kitimat
Dredging First and Second Narrows in Burrard Inlet to allow passage of larger ships is already on the agenda
By Don Whiteley, Special to the Vancouver Sun, December 1, 2008
VANCOUVER In the past six months, the concept of Canada shipping crude oil
to Asian markets has warmed considerably, with major Chinese and Korean investments
in Alberta's oilsands developments and the impending announcement of serious backers
(likely Asian) for a new crude-oil pipeline to Kitimat stoking the fires.
Adding a huge stimulus to this concept is the fear in Alberta that U.S.
President Barack Obama and his government are serious about putting shackles
on Canada's oilsands production. The term "dirty oil" just won't go away,
and given that the U.S. now takes nearly all of Canada¹s oil exports, the
risk of serious economic damage is real. Any alternative customer
especially in Asian markets is worth pursuing vigorously.
As a result, environmental and First Nations organizations are shining huge
spotlights on the Enbridge Inc. proposal to build a
525,000-barrels-of-oil-per-day pipeline, called Northern Gateway, from
Alberta to a tidewater port at Kitimat. Enbridge expects to file its formal
application for this project early next year, and at the same time announce
significant commercial support for the project.
All the environmental media campaigns are aimed at this northern proposal
which, even if it gets fast-track government approval (highly unlikely),
won't see a ship enter the harbour until 2015 at the earliest.
Flying completely under the radar and blissfully ignored by those same
environmental and First Nations organizations is an existing and rapidly
growing crude oil shipment business through the Port of Vancouver, complete
with its own significant expansion goals and sights also set on future Asian
markets.
Kinder Morgan Canada already runs a crude oil pipeline from Alberta to
Burnaby, recently expanding it to carry 300,000 barrels a day of oil. It
also has another expansion program in the works (perhaps getting the green
light in the next few months) to take that line, a few steps at a time, up
to a maximum potential of 700,000 barrels a day.
While some of that oil continues through an extension to Burnaby's Chevron
refinery and oil refineries in Washington state, and some of the pipeline
capacity (about 20 per cent) is used to ship refined products such as
gasoline, almost all of the expanded capacity has left our shores on a ship.
In 2009, the Port of Vancouver saw crude oil shipments grow by 94 per cent
(as of the end of October) from 1.7 million tonnes last year to 3.3 million
tonnes this year. Kinder Morgan officials say they expect to load 80 oil
tankers in 2009, compared with 55 the year before. In less than a year since
Kinder Morgan's expanded pipeline was opened for business, it's pretty much
full.
Why is the environmental movement ignoring this business? Part of it lies in
the fact that oil has been shipped through Vancouver in tankers since the
1950s, with nary a drop spilled anywhere. That's not a stat you'd like
widely known if your goal is to stop similar shipments from a new port in
Kitimat.
Added to that is the fact that the ships destined for Kitimat are VLCCs
(very large crude carriers), which hold two million barrels of oil. Ships
coming to Vancouver are much smaller.
But they may soon get bigger.
Port Metro Vancouver has, for the past five years, been working behind the
scenes on protocols and regulations designed to first allow the current
fleet of ships taking on oil at Burnaby's Westridge Terminal to take on
maximum loads.
Aframax tankers, the largest to berth at Westridge, can carry about
700,000 barrels of oil. But restrictions dictated by the Second Narrows
waterway means they can never take a full load, and can draw only 12.5
meters of water.
"The goal is to be able to have an Aframax, fully loaded, at 15 meters,"
said Yoss LeClerc, Port Metro Vancouver's harbour master. "By the end of the
first quarter next year, we'll go to 13.5 meters, but there's still some
work to do to hit 15 meters."
Water depth and channel width are not the issue here; it's how can you
safely navigate those depths and widths with the regulations, new
navigational aids, and crew training to take better advantage of the
existing channel, with perhaps a little dredging to help. As LeClerc
explains, the goal of allowing fully loaded Aframax tankers to transit the
Second Narrows is achievable with a significant increase in safety margins.
But that's not the end of it. The next goal is to determine if Suezmax-sized
tankers, carrying one million barrels, can safely get to and from the
Westridge loading dock.
(Panamax ships are the largest vessels that can use the Panama Canal;
Suezmax ships are the largest vessels that can use the Suez Canal; and
Aframax vessels break that naming pattern as they use an acronym from the
Average Freight Rate Assessment (AFRA) tanker rate system.)
Norm Rinne, the senior director for business development at Kinder Morgan
Canada, says that the current fleet of Aframax and the smaller Panamax-sized
tankers are just the right ships for the California ports, where most ships
from Vancouver are headed. But if Asian markets become the primary
destination for all that crude oil, then bigger ships will be needed.
"We can grow the pipeline over time, look to add a Suezmax, and offer a more
cost-effective route to Asia if that market grows," Rinne said. "That¹s what
we like about expanding our corridor: Our shippers have the most options. If
it makes sense for a Suezmax, then it gives a more economic route for
barrels to Asia."
Said the port's LeClerc: "Suezmax is not impossible. We have the width, the
depth, and we have plans to dredge First and Second Narrows. There is a
possibility for Suezmax."
He points out that a loaded Suezmax vessel will need 18 meters of depth.
Rinne says that once Kinder Morgan has expanded its Vancouver pipeline
system to 700,000 barrels a day, additional market demand would require a
new pipeline to Kitimat, perhaps paralleling in some respects the Enbridge
project.
And that may end up being Canada's ace in the oil export business. Combined,
the Kinder Morgan and Enbridge projects would bring crude oil capacity on
Canada's West Coast to about 1.6 million barrels a day, with 700,000 through
Vancouver and 900,000 through Kitimat.
If exports to the U.S. dry up , even partially, there will likely be a gold
rush to get these new outlets in place as quickly as possible.
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