Calgary (Platts)--10Oct2013/152 pm EDT/1752 GMT

Alberta's oil sands operators will continue to grapple with the logistical bottlenecks of hauling oversized equipment from the US despite about $1.2 billion being invested in improving existing road networks along the Texas-Alberta trade corridor, a provincially elected representative said Thursday.

Work is underway on twining and upgrading state highways in Texas, Montana, South and North Dakota, Colorado and Wyoming, but it will take a while for a solution to be found, Dave Quest, MLA (member of the legislative assembly) from Strathcona-Sherwood Park and Alberta's representative to the Ports-to-Plains Alliance, said from Edmonton, without setting any time lines.

The alliance is a Texas-based grouping of stakeholders, elected representatives, and business and economic development officials that focuses on energy issues in the US and Canada.

Besides Alberta, nine US states are members of the PPA. Quest was in Texas last week to attend PPA's annual meeting.

"Recent hurdles being faced by Alberta's producers did certainly come up for discussion, as it also affects the 170-odd companies in Texas that do business in Fort McMurray's oil sands sector. However, there will not be a silver-bullet solution soon for transporting the megaloads modules -- highway improvements are also required in Alberta," he said.

Oil sands producers in Fort McMurray have traditionally used the 2,370-mile trade corridor to truck heavy-load equipment fabricated either in the US or eastern Asia.

But in 2010-11, Calgary-based Imperial Oil faced major logistical and legal challenges in hauling megaloads from Washington state, resulting in delays in the startup of one oil sands facility in Alberta and cost overruns of an estimated $2 billion.

"For our [110,000 b/d] Kearl initial development, about 200 prefabricated modules were sourced from a South Korean manufacturer with a proven track record of safe delivery," Imperial Oil spokesman Pius Rolheiser said Thursday. "Our project team originally planned to move the modules of various dimensions from Vancouver, Washington state, primarily via Highways 12 and 200 through Idaho and Montana."

Due to the extended delays in obtaining permits for those highways, as a result of legal challenges, the project team implemented an alternative transportation strategy to mitigate project cost and schedule impacts, he said. The plan called for the disassembly of modules for easy movement on interstate highways and subsequent reassembly in Edmonton before their final journey to the Kearl site.

Simultaneous construction and commissioning activities, combined with the earlier-than-normal onset of freezing weather, pushed critical startup activities into more challenging winter months and resulted in unfavorable productivity and cost impacts, he said.

Imperial has learned the lessons and for the Kearl expansion project, Rolheiser said, all equipment modules are being fabricated at industry yards in Edmonton.

"As such, we will not be exposed to the US transportation delays experienced in the initial development," he said.

In July, work was more than 50% complete for the 110,000 b/d Kearl expansion and startup is scheduled ahead of the onset of winter in late 2015, Rolheiser said.

Another oil sands operator, Athabasca Oil Corp., is hoping for a solution "very soon" for how it will haul a megacargo from the US for its 12,000 b/d Hangingstone facility in northern Alberta, company spokesman Andre De Leebeeck said Thursday.

In early August, American aboriginal tribes and environmental groups staged blockades and vowed to seek a court order to block Athabasca's shipments until a review is held on the impacts on the community and scenic areas along the corridor. The shipment was due to leave Port Wilma in Lewiston, Idaho.

With Alberta's oil sands output projected to increase by 300,000 b/d in 2014, MLA's Quest said a robust transportation network along the Texas-Alberta corridor will be a key component.

For commercial reasons, oil sands producers will continue to source equipment from the US and Asia.

"It costs about one-third less to fabricate in Texas, compared with Edmonton," said Maxim Sytchev of Dundee Capital Markets. "But megaloads will be a part of it."

--Ashok Dutta, newsdesk@platts.com
--Edited by Jason Lindquist, jason.lindquist@platts.com

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