|
Enbridge warns of possible pipeline over-capacity
Gary Park For Petroleum News
Between TransCanada and Enbridge — Canada’s two biggest energy pipeline companies — there’s seldom a meeting of the minds.
From the time they got caught up squabbling over rights to ship Alaska North Slope gas to the Lower 48 and started encroaching on each other’s traditional territory (TransCanada into Enbridge’s crude oil shipments and Enbridge into TransCanada’s once-sacred natural gas turf) they have glared at each other across the no-man’s land between their downtown Calgary office towers.
And it may simply come down to a fundamental disagreement over the future of North America’s fossil fuel supplies and where those volumes should be delivered.
Daniel warns of overcapacity Enbridge Chief Executive Officer Pat Daniel, in a series of year-end interviews, gave his rival a fresh prod by suggesting that TransCanada’s proposal for a 500,000-barrel-per-day Keystone XL line from Alberta to U.S. Gulf Coast refineries will create pipeline overcapacity from the oil sands.
He said there is already “more capacity than we need for some time and XL would add incremental capacity. I just don’t know where the volume is going to come from based on current production forecasts.”
Enbridge is already mounting a regulatory challenge to XL, arguing it isn’t needed and that its construction would increase pipeline tolls on exports from the oils sands.
TransCanada has countered, telling the National Energy Board that producers want XL, based on the contracts they have signed.
Gulf expansion on hold Daniel said his company has given up for now on expansion to the Gulf Coast to focus on “regional growth” projects, such as connections from the Alberta oil sands region to Edmonton, the transport of oil from the Bakken play that crosses the border from Saskatchewan into North Dakota and Montana and addition to its natural gas pipelines to new discoveries in the Gulf of Mexico.
Enbridge is currently spending C$300 million expanding its pipeline network to the Bakken formation and is discussing with Canadian and U.S. producers the investment of another C$100 million-C$300 million.
But Enbridge is no longer counting on grand-scale pipeline connections from the oil sands, suggesting new capacity will occur in increments of 20,000-30,000 bpd.
Daniel said there have been four or five major discoveries close to his company’s infrastructure in the Gulf of Mexico, and Enbridge believes it has a good chance of securing some of the business.
“We’re aggressively trying to figure out where the big demand is going to be for natural gas,” he said. “We think Florida, the U.S. southeast and to a certain extent the southwest, where the air conditioning load is quite high and there’s going to be growth in demand for electricity,” he said. Setback with LaCrosse Enbridge took a setback when its planned LaCrosse pipeline from the Haynesville shale gas region in Texas and Louisiana failed to achieve the necessary producer backing.
Daniel said Haynesville producers simply weren’t ready to make 20-year shipping commitments.
Also stalled is a proposal to develop the Rockies Alliance pipeline, which would have delivered gas from the U.S. Rocky Mountain region to Chicago.
The largest candidate on Enbridge’s books right now is the planned 525,000 bpd Northern Gateway pipeline from the oil sands to Kitimat on the British Columbia coast, the bulk tagged for export to Asia.
Daniel reiterated that a regulatory application is planned for the first quarter of 2010, launching a two-year regulatory process that will likely be “noisy and contentious,” but should be outweighed by the world’s need for energy and the strategic importance of Northern Gateway for Canada.
| 