Pipeline to the east may not be a pipe dream1/30/2013
Faced with losing billions of dollars in potential revenue, western Canadian oil companies are looking eastward to access new domestic and international markets.
Brenda Kenny, president and chief executive officer of the Canadian Energy Pipeline Association, told a Halifax business audience Tuesday that a “shortage of energy highways” in the country means a potential loss of $70 billion for producers and the national economy.
“When you don’t have the infrastructure that enables you to move (goods) around, you get market distortion,” she told a Halifax Chamber of Commerce luncheon at Casino Nova Scotia.
TAYLOR: Bring on low-cost oil from the West
In that vein, connecting Eastern Canada to western crude supplies “can make a real difference,” Kenny said.
TransCanada Corp. has proposed a $5-billion project to convert a little-used natural gas pipeline that would either stop in Montreal or continue on to Saint John, N.B., which boasts the 300,000-barrel-a-day Irving Oil refinery and a deepwater port.
That pipeline would carry up to a million barrels of oil per day.
New Brunswick Premier David Alward will travel to Alberta next month to meet with his counterpart, Alison Redford, and express his support for the Trans-Canada proposal.
After her speech, Kenny said the pipeline TransCanada wants to repurpose, located north of Lake Superior, was built in the 1950s.
“With … shale gas coming on, the way in which supplies and markets are connecting in natural gas is adjusting,” she told reporters.
“So the tube of steel that’s served Canada well for natural gas north of Superior, people are asking, ‘Well, if we’re short of oil capacity and we’ve got an excess of gas capacity, maybe we can switch the use of that.’”
Similarly, Enbridge Inc. is proposing to reverse its Line 9 to deliver up to 240,000 barrels of oil to refineries in Montreal.
“There’s nothing new about it, no magic in the math there, other than, for a period of time, it was actually more economically efficient to flow the other way because offshore crude was less expensive,” Kenny said.
If those proposed pipelines ultimately end in Montreal, producers may find alternative means of transporting oil to the Maritimes, she said.
“Carrying western crude by rail in a modest way to link in to the Irving refineries probably makes sense. I think there’s some crude runs being tested already.”
Faced with regulatory hurdles and opposition to build pipelines to British Columbia and the United States, oil companies are looking to reach new markets.
An oversupply of crude from Canada and the northern United States, attributed to a lack of storage capacity and pipeline infrastructure, has created conditions where Alberta heavy crude has recently been trading at $30 to $40 a barrel less than the North American benchmark price.
“The reality is that the oilsands development is pipeline constrained, so whether it’s to Eastern Canada, whether it’s to Western Canada, the U.S., they need to have further pipeline outlets from the oilsands to continue the development. That’s a given,” Paul Lechem, an analyst at CIBC World Markets Inc., said in a telephone interview.
With TransCanada Corp. continuing to gauge interest from oil companies, Lechem said a west-to-east pipeline could bring western crude to refineries in a number of destinations, either domestic or international.
“It’s Quebec City, it’s Halifax, it’s Saint John, potentially eastern seaboard of the U.S., potentially western Europe, potentially Asia. I think there’s a number of potentials, and I don’t know if it’s been, at this point, tied down.”
Don Thompson of Canadian Oil Sands Ltd., who also spoke at the luncheon, said broad market access is important for all commodities, including potash, fisheries and forest products, as well as oil and gas.
“All of our commodities should get the global price to maximize the benefit to this country for all Canadians,” Thompson told reporters.
But he also stressed the importance of a broad discussion on all forms of energy sources, including hydroelectricity, wind and solar.
“We will need to draw on more and more energy sources, we will have to increase our dependence on more and more renewable resources, but we will also need to continue to use hydrocarbons, whether that’s coal, or oil, or gas, or natural gas.”
(The Chronicle Herald)