Enbridge Inc.’s Hardisty Contract Terminal helps Alberta oil suppliers manage the effects of price swings
Jumbo tanks erected last fall 160 kilometers southeast of Edmonton a pyramid-scale landmark
Although 2009 was relatively stable by oil history standards, prices changed as much as 40 per cent from one quarter of the year to the next. Suppliers that could afford to hold inventory in storage and postpone selling were richly rewarded for their patience.
In the bleak January-March winter first quarter of 2009, the oil price averaged $43, making the value of a Hardisty-sized storage pool of 7.5 million barrels $332.5 million. During the spring period of April through June, markets brightened up. The average oil price climbed to $59.62, and the value of 7.5 million barrels blossomed to $447.2 million. In July through September, the numbers kept on rising to $68.48 and $513.6 million. Growth slowed down during the last three months of the year, but there were still respectable gains to an average price of $70 a barrel and a total value of $525 million for the pool.
To give the industry freedom to respond to trends and act on expectations, the Hardisty terminal works like an apartment building. Oil dealers of all kinds – the tenants include producers, buyers and marketing agencies – lease tank storage capacity by the month.
Rent is paid regardless of how or when the space is used. Added services include heating low oil grades to keep them liquid, supplying condensate or natural gasoline as thinner for bitumen, and custom blending of various crude types to suit variable refinery and seasonal requirements.
The Hardisty site represents a major addition to Canadian oil warehouses. Other tank farms are mostly parts of regulated pipelines, financed with shipping tolls, and not rented out for energy free trade. The new Canadian service imports a long-standing feature of U.S. oil markets, where Enbridge provides for all comers a 15 million-barrel tank farm at the Cushing trading hub in Oklahoma.
Contract oil terminals are in constant activity. Wuori compares operations of the tanks to engine pistons. Floating roofs slide up and down the steel walls as customers fill or drain their rented space. The movable tops prevent formation of petroleum vapors liable to become safety hazards or potent greenhouse gases. Double seals work like piston rings to keep the giant containers tight.
Rising out of a plains hilltop and brightly lit at night, the monster tanks dwarf the nearby farm town of Hardisty and highlight the growing scale of Alberta’s oil industry. The structures jut up nearly 20 meters into the sky and are 60 to 90 meters in diameter. It took about 30 months for 600 workers to erect the steel structures and garnish them with 300 kilometers of electrical cable, 40 kilometers of large-bore pipes and 57,000 liters of paint and coating.
Construction started at the 2007 height of industry’s rush to the oil sands as the biggest reserves available to investor-owned energy firms outside the Organization of Petroleum Exporting Countries. But demand for the Hardisty tanks stayed strong after the 2008 financial and energy tumbles slowed down new Alberta projects, Wuori reports. Reduced and gyrating prices call for fast market footwork, and Enbridge designed room to expand into its giant new oil warehouse.
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