Converting part of TransCanada’s Mainline could fuel domestic use
'Canada has been so stuck on the idea that energy development depends on boosting exports to the United States and Asia that the obvious other option, increasing domestic use, has been getting less attention than it deserves. That option will be thrust to the top of the national agenda if TransCanada Corp. moves ahead with plans to convert parts of its underutilized Canadian Mainline system from gas to oil transportation, which could be ready for takeoff by the end of the year. The conversion would send a river of Western Canadian oil — up to one million barrels a day — to Central and Eastern Canada, pushing out 700,000 barrels a day of crude imports from countries such as Saudi Arabia, Libya and Nigeria. It would build on ?smaller, similar plans by competitor Enbridge Inc.
The Mainline conversion would be so large in scope and bring so many benefits — lower gasoline prices and lower heating bills in the East, more profitable refineries, a secure market for Canadian oil, more jobs and more government revenue — it would truly distribute Canada’s oil wealth.
[...] After more than a year of behind-the-scenes planning to determine whether the project is feasible, Alex Pourbaix, president of energy and oil pipelines at TransCanada, said in an interview his company is confident the conversion can be pulled off technically and that it would offer competitive tolls relative to other options.
Now TransCanada is moving to a more public phase to lock up market support.
“When news first came out that TransCanada was considering this kind of a project, there was a fair bit of interest … but [shippers] felt that it was a challenging project,” he said. “Here we are, 12 or 15 months later, and the interest has grown, not diminished, and the view of potential shippers is that this is a very compelling option to get crude to market — Alberta, Saskatchewan and Bakken crude.”
Indeed, support rose once potential shippers realized the pipeline is already 80% in the ground, won’t face controversial regulatory processes such as U.S. State Department approval, and would supply a secure market that is now paying high world oil prices. In addition, the pipeline, which could end in Montreal or on the East Coast, could take Western oil to tide water and enable exports to the U.S. East Coast and Gulf Coast, Europe, India and China.
[...] Mr. Pourbaix said the conversion plan would involve buying part of the gas system out of regulated service, likely at book value, and filling it with oil. The project would be underpinned by long-term oil shipping commitments. The Mainline’s remaining gas customers would benefit from lower tolls. The Mainline is composed of six tubes across the Prairies. TransCanada would likely continue to move gas in five. Conversion of one would allow it to transport between 500,000 and one million barrels a day. Some pipeline construction would still be required to fill in gaps and the end point — whether Montreal or the East Coast — is still under discussion. Mr. Pourbaix anticipates a comprehensive regulatory review process and one year to 18 months of construction. Despite the support received so far, he is prepared for opposition after steering the Keystone XL project through its regulatory review, while hoping the country doesn’t miss out on the opportunity.
“Right now, the highest gasoline prices in the nation are in Eastern Canada, in Quebec. You have this vibrant refining sector in Eastern Canada that has been really handicapped … by high Brent prices. With a low-cost feedstock, I hope there are opportunities for more employment and more investment for the petrochemical industry in that part of the country. I think there is a lot of merit in using up all the resource that we can in our own country.”
Already, opposition parties as diverse as the Alberta’s Wild-rose and the federal NDP are supporting it because of its potential to create value-added jobs, while the environmental movement has said little. What’s missing is government leadership as vigorous as its push for Asian energy trade.
business.financialpost.com
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Ho hum ... since the idea was first proposed here, lots of opposition. Only a few could see the obvious benefits. I repeat: Canada will realize multidimensional and long-term gains. Not least would be less reliance on NAFTA signatories to whom tribunal decisions have meant nothing.
Jim |
