Pipeline will reach N.B. industry analyst says11/2/2012
A $5-billion project to carry Alberta oil to eastern Canada is likely aimed at feeding Saint John’s oil refinery, according to a Calgary-based oil analyst.
In recent months, Calgary-based TransCanada Corp. has floated the idea of converting part of its natural gas mainline – the eastbound main artery for natural gas out of Alberta – partly to oil service to supply refineries in Eastern Canada and the Eastern Seaboard of the U.S.
Company CEO Russ Girling told analysts earlier this week that the $5-billion project is both technically and economically feasible.
Edward Kallio of Ziff Energy Group says the pipeline project is intended at heading further east than Montreal.
“They would be looking at going right into Saint John,” Kallio said.
The $5-billion estimate involves bringing Alberta oil east to Montreal by building roughly 375 kilometres of new pipeline to connect to 3,000 kilometres of existing pipe.
An additional 220 kilometres of pipe would be needed to bring oil to Quebec City and whether the line would stop at refineries in Quebec or extend all the way to the East Coast remains unknown.
But Kallio said the pipeline might not necessarily be sending just Canadian crude east.
Irving Oil Ltd. is now refining limited amounts of crude oil from North Dakota, just south of Saskatchewan, to determine whether the practice makes sense in the long run, according to analysts.
Reports suggest Irving Oil’s Saint John refinery is receiving one train load a week from the oil-rich Bakken Field of North Dakota.
“People forget that there is a huge tight oil play in North Dakota,” Kaillo said. “That crude really suits the Saint John refinery better than the heavier oil from the oilsands.”
Kaillo said the heavier crude oil would force the Irving refinery to make expensive retrofits to be able to handle the oil, while the lighter Bakken oil would be cheaper to receive by pipe than by rail.
The early-stage proposal to ship as many as one million barrels a day of western crude to eastern refineries has steadily been gaining traction.
“Discussions with potential shippers and other stakeholders are underway to determine if this is a project that the market wants to see – and based on early indications, we believe that it is,” Girling said.
The eastern option has emerged while projects like the Northern Gateway and the Trans Mountain expansion to carry oil west for export to California and Asia has faced serious stumbling blocks.
Earlier this year, the National Energy Board approved Enbridge’s plan to reverse a section of its pipeline to push oil as far as Hamilton, Ont., a move proponents of a pan-Canadian pipeline have said is a necessary step in a plan to pipe Alberta oil to Atlantic Canada.
Enbridge has said the reversed segment will allow for incremental western crude, which can be sourced from a number of locations in Alberta, Saskatchewan and Manitoba, to access the lucrative Ontario market.
The company has since announced its intention to bring Alberta oil even further east to Montreal for refining.
Enbridge is also pursuing the complete reversal of its so-called Line 9 pipeline that connects western Canadian oil to Quebec with a capacity of 240,000 barrels per day.
Eric Axford, executive vice-president of business services for Suncor Canada, told the Telegraph-Journal last month that the ability to send Alberta oil east will help fill existing refining capacity.
Suncor operates a 137,000-barrel-per-day refinery in Montreal.
“With a refinery in Montreal, obviously it would be advantageous to us to try to connect,” Axford said. “It would let us send actual oil from our oilsands operation to the Montreal refinery.
“We have refineries throughout Canada and one in the United States and the reason we invest in those is really to be able to process our own crude oil there and right now we can’t get to Montreal because of infrastructure blocks.”
In terms of a National Energy Strategy, Axford said eastern Canada presents a new market.
“Access to market is a really important part of it,” he said. “I think the eastern Canadian markets are much more in our control to actually connect than other markets.
“How far it goes? Economics does need to determine how routes evolve, but I think we need to get to new markets and expand existing markets in whatever way we can to capture the full opportunity that exists in the country.”
He added: “Eastern market access is a very important part of that. A call for a Canadian energy strategy is a call to look at expanding market access.”