Pipelines pumping out more cash as oil and gas volumes increase

As companies produce more oil and gas in Western Canada, the pipeline sector is experiencing rapidly rising revenues.

The major export pipelines in the country earned $10 billion in 2020, up nearly 50 per cent compared to $6.8 billion in 2015.

The figures are included in a new report released Wednesday by the Canada Energy Regulator.

Revenues have generally increased as more oil and natural gas is transported and as improvements are made to the pipeline system.

Oil pipelines in particular are operating at near capacity. 

As of the end of March, the Trans Mountain pipeline and TC Energy's Keystone pipeline were both transporting more oil compared to the same time last year and operating at 100 per cent capacity, the regulator said. Meanwhile, Enbridge's Mainline is at 92 per cent of capacity, which is slightly lower compared to last year, although activity has picked up after oil prices and production fell during the first half of 2020. 

Even though no new oil pipelines have been completed in several years, companies have found ways to transport more oil using existing lines. 

Between 2015 and 2019, about one million barrels per day in improvements have been made, according to the Canada Energy Regulator. During the same time, oil production in the country increased by about 900,000 barrels per day.

Enbridge's Mainline and Express pipeline are both able to transport higher volumes through the same line. One technique is to install a prefabricated, drag-reducing agent skid, which is a device that injects a chemical to increase the flow of oil.

"I think it was very important given how much growth we had in [oil] production in that period," said Darren Christie, chief economist with the Canada Energy Regulator.

"There's been such impetus, so much value, from being able to add capacity over the last number of years, so there's been a lot of effort to do that through optimizations, but it's going to become increasingly challenging, I think, to continue to do that without eventually bringing in new projects to add capacity," he said.

The report also tallies up how much money it will take to eventually decommission the major pipelines in the country. 

At the end of 2019, the total cleanup cost was estimated at more than $10 billion. Companies have set aside more than $2.3 billion toward abandonment costs and typically increase that amount every year.

"It's always a work in progress. As new information becomes available, those cost estimates get updated," said Christie, adding the regulator also reviews how much money companies need to allocate for eventual cleanup costs.