Unfazed by very ‘vocal’ opposition

Enbridge ready to apply for Northern Gateway pipeline, argues First Nations don’t have veto; Apache looking at FEED contracts

Gary Park

For Petroleum News

The two-pronged push to access Asian markets with Canadian oil and natural gas is gathering pace despite vehement domestic opposition.

Enbridge reaffirmed it expects to file an application later in May with the National Energy Board for its Northern Gateway pipeline from the Alberta oil sands and Apache expects to award front-end engineering and design contracts within the next two months.

Both projects would use the deepwater port at Kitimat on the northern British Columbia coast for tanker shipments across the Pacific. But both are grappling with opposition from environmentalists and First Nations.

Enbridge Chief Executive Officer Pat Daniel took his case to Toronto April 29, meeting with the editorial boards of Canada’s two national newspapers.

He admitted the opposition to Northern Gateway “is more vocal than we had anticipated,” but also made clear he won’t be forced into submission. Instead, Daniel renewed his campaign for the Canadian government to develop a “national energy strategy.”

Confident the proposal will gain regulatory approval within two years and start shipments in 2015, he made clear that Enbridge is ready to mount a vigorous defense of its proposal, which he said has “brought this issue of societal hypocrisy around energy development to focus for me.”

“I just don’t understand how we can, as a society, say: ‘Hey, let’s oppose projects, yet at the same time be big users of energy.’”

Daniel said he is not happy about developing a project like Northern Gateway “with so many people opposed to it. I realize they are a relatively small number compared to the majority in Canada, but I don’t like people running ads suggesting Enbridge is going to create an environmental disaster.”

He said the National Energy Board and the Canadian government will make the final determination in the national interest.

No veto

“The way I read the laws of the country, (First Nations) don’t have a veto,” he said, referring to the claims by a number of aboriginal communities that tankers carrying oil sands production will not be allowed to “transit” their land or waters, raising the specter of another Exxon Valdez disaster.

Daniel said tanker traffic off the British Columbia coast will involve double-hulled vessels, with British Columbia-certified pilots and tugs attached to the stern and bow.

“Can we promise there will never be an accident?” he said. “No. Nobody can.”

Daniel said opening up markets in Asia is vital if producers are to negotiate a better price for their crude than they can get in the United States.

However, he conceded that diverting export volumes from the U.S. could increase pipeline tolls because those costs would be spread among fewer barrels of oil.

“Experience would show that the improvement in netback pricing by opening up that alternate market would more than outweigh the toll increase associated with less volume going eastward,” he said, countering arguments by Suncor Energy and other producers that Enbridge and TransCanada have overbuilt pipeline capacity to the U.S.

Refiners want bitumen

He saw no reason why environmental standards at Asian refineries should not match those in North America, dealing with Canadian government threats to block exports of raw bitumen in order to take advantage of lower greenhouse gas emission rules in other countries.

Making his pitch for a national energy strategy, Daniel proposed carbon taxes, cap-and-trade regimes, subsidies for renewable energy and major conservation efforts, without curbing development of the oil sands to meet demand in the Asia-Pacific region.

Separately, Apache, now operator of the Kitimat LNG project is evaluating engineering and design proposals from four parties. The objective is to provide an outlet beyond North America for anticipated volumes of gas from British Columbia’s Horn River play.

Steven Farris, Apache’s chairman and chief executive officer, said an LNG project would be a “big step forward” for his company.

“It allows us to monetize very large gas resources at LNG prices which are generally linked to crude oil and gives us a large stable production and cash flow profile to complement our portfolio,” he said.

Apache, in partnership with Encana, is reporting improved drilling efficiencies in Horn River, with the average drill time now 19 days from spud to rig release at an average cost of US$3.7 million per well for a 7,200 foot horizontal section.

Apache has also completed 274 fracture stimulations on a 16-well pad, with up to 22 fracs on some wells.