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Gold/Mining/Energy : KERM'S KORNER -- Ignore unavailable to you. Want to Upgrade?

To: Kerm Yerman who wrote (8025)	12/19/1997 3:36:00 AM
From: Kerm Yerman	Read Replies (4) \| Respond to of 15196

MEDIA - PIPELINES / NEB Opens IPL Pipeline Between Sarnia And Montreal To U.S. Oil Friday, December 19, 1997 Pipeline flow to be reversed The National Energy Board yesterday approved reversing the flow of the only crude oil pipeline between Sarnia, Ont., and Montreal, one of the last remnants of the National Energy Program introduced 20 years ago. In a decision handed down after the markets closed, the NEB said it has accepted an application by Interprovincial Pipe Line Inc. to change the flow of its Line 9 to an east-to-west direction, along with a revised tolling method. The board said the change isn't likely to have adverse environmental effects. The move means refiners in Sarnia will be able to buy imported offshore oil coming from Portland, Me., instead of western Canadian oil. Oil from the Hibernia fields off Canada's east coast may also eventually become a source. For western Canadian producers, the decision is expected to lead to lower oil prices, increased competition and more Canadian oil going to U.S. customers. IPL built the pipeline for the federal government in 1976 for $250 million to ensure Quebec's oil supply. The government wanted Eastern Canada to have access to western Canadian oil to protect the region from unstable oil prices and threatened boycotts from some producers in the Middle East. However, the line has been mostly idle in the past two decades because the price of imported oil declined. At present, almost no western Canadian oil is available in Montreal. Ottawa spent $280 million to maintain Line 9, which it had an option to buy at the end of 20 years. "We feel that, over time, offshore crude is going to be cheaper in Ontario than western Canadian crude," said Bill Bishop, manager for pipelines at Petro-Canada, one of four refiners backing the reversal. That's because Canadian oil is priced in relation to U.S. oil, whose price is driven up by the cost of transportation from the U.S. Gulf Coast. The other supporters were Imperial Oil Ltd., Shell Canada Ltd. and Nova Chemicals Ltd. In its decision, the NEB approved the tolling methodology proposed by IPL, but denied 100% priority access for the four refiners backing the project. Instead, IPL must keep 20% of capacity for open access by all potential shippers on a monthly basis. IPL, with a 100% interest in the line, plans to invest $89 million in the project, including adding new facilities and some pipe relocation in Ontario. "We are pleased that this important project has been approved," said IPL's spokesman, Alan Roth. "We feel that the board seems to be fostering more market-based approaches. The project is good business for IPL. By more effectively using this existing pipeline, we will realize economic benefits." Line 9 will be able to move 160,000 barrels a day when it goes into service next September. This is expected to increase to 240,000 b/d in 1999. The decision will not only mean lower prices for western Canadian producers, it will likely mean lower prices and more competition in the market in Central Canada, said Kevin Brown, managing director of ARC Financial Corp. in Calgary. "It provides another source of supply for those refineries," he said, adding it forces more western Canadian crude into U.S. markets. But Roth said the arrival of offshore oil is unlikely to threaten Canadian producers but will probably supplant oil from the U.S. Gulf Coast. Ontario already imports more than 140,000 b/d from the Gulf Coast.