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Exclusive: TransCanada toughens pipeline pressure limits for gassy crude

By Nia Williams

CALGARY, Alberta (Reuters) - TransCanada Corp reduced the limits for vapor pressures on its main U.S. oil export pipeline this month, regulatory documents show, one of the clearest signs yet of growing concern over gas-infused crude.

The formal move to tighten technical specifications and mandate improved testing on its 590,000 barrel per day Keystone pipeline had been planned for some time, industry sources said. The change is focused on maintaining quality standards and is not specifically related to any safety issues.

However it comes at a time of intensifying public debate over the potential dangers of transporting certain types of oil following a series of train derailments and explosions involving tank cars carrying light crude oil, including the Lac-Megantic, Quebec, crash that killed 47 people.

While rail companies worry about safety, pipeline companies like TransCanada want to prevent overly gassy crudes from entering their system to avoid shipping the ultra-light components to refiners who have little use for the gas.

The North American oil industry is starting to address the issue of testing for and policing the presence in crude of organic compounds of low molecular weight such as methane, ethane or propane, known in the industry as "light ends."

Those concerns could become more prevalent as gas-rich shale production expands and diluent-blended Canadian crude output grows.

TransCanada declined to comment on the change, which was detailed in documents filed with the U.S. Federal Energy Regulatory Committee and Canada's National Energy Board.

Canadian pipeline peer Enbridge Inc is currently analyzing whether to change its vapor pressure testing method, a spokesman said. Kinder Morgan Energy Partners LP declined to comment on possible changes in its tariff.

Such volatile components occur naturally in light crudes such as North Dakota's Bakken, the variety that has been involved in most of the explosive oil-train derailments. But they are also added to Canadian heavy crudes in the form of condensate, to dilute raw oil sands bitumen and help it flow through pipelines.

Problems for refiners occur when shippers, looking to cut costs and reduce the amount of diluent needed per barrel, blend a higher proportion of lighter and less valuable condensates like butane, pentane and hexane into their crude.

Light ends are volatile gases with low molecular weights, measured by carbon numbers, with a lower number signifying higher volatility and higher vapor pressure. Condensate carbon numbers typically range from C4 to C12.

"The C5 and C6 molecules do not have as much refining value as the bigger molecules," said Bill Lywood, founder and president of Crude Quality Inc. "When it gets to the other end the refiner is looking at C5 and C6 when he wants C8."

Demand for condensate is expected to grow rapidly over the next decade as heavy oil production ramps up.

The Canadian Association of Petroleum Producers forecasts heavy crude oil supply to grow to 3.6 million barrels per day in 2020 from 1.8 million barrels per day in 2012. With blending ratios of roughly one third condensate to two thirds bitumen per barrel, condensate demand would top 1 million bpd.

NEW METHODS

TransCanada has lowered the vapor pressure tariff on its Keystone pipeline to 69 kiloPascals absolute (kPa-a) from 103 kiloPascals (kPa), measured at 37.8C.

Furthermore, the company specified pressure must be measured using an improved method known as ASTM D6377, or true vapor pressure test. The new method mandates the use of a pressurized cylinder for crudes that contain volatile light ends and avoids exposing the sample to the atmosphere.

Unlike the old Reid vapor test, which was designed in the 1930s, the new method is designed to stop the most volatile light ends from flashing off as soon as they come into contact with air.

Concerns about imperfect testing methods have been around since at least 2000, when Bob Falkiner of Imperial Oil Ltd raised it in a paper submitted to the Canadian Crude Quality Technical Association (CCQTA).

"If the sample is supersaturated with dissolved gas or light ends, this procedure can cause large vapor losses, resulting in a much lower than true value," he wrote.

Other companies are also likely to switch to the newer testing method, although they may not reduce pressure limits as far as 63kPa, says Andre Lemieux, secretary of the CCQTA.

Enbridge, Canada's largest pipeline company, is analyzing its own system to see if a change from the Reid method would be beneficial or required, said spokesman Graham White, although he added Enbridge's current vapor pressure was already similar to TransCanada's revised number.

(Reporting by Nia Williams; editing by Jonathan Leff and David Gregorio)

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