|
Asia-bound, ‘sooner rather than later’ Enbridge, Kinder on verge of revealing strategies to open new markets for Alberta oil sands production, urged on by interest groups Gary Park For Petroleum News
Between now and mid-2010, the prospects of shipping bitumen from the Alberta oil sands to Asian refineries are heading toward make-or-break decisions.
Enbridge anticipates submitting an application to Canada’s National Energy Board for its 525,000-barrel-per-day Northern gateway project and Kinder Morgan is due to release details of expansion plans for its 300,000 bpd Trans Mountain system from Alberta to the Vancouver area.
Those moves come amid a rising clamor from industry and political leaders to provide a second major outlet for Canadian crude rather than rely almost exclusively on the United States, given the uncertain future demand for oil in the Lower 48 and unease about what impact North American climate change legislation might have on the oil sands.
BMO chief economist Sherry Cooper told a Calgary audience on Nov. 19: “We must export oil to China. It’s very important. And the sooner the better.”
She said Asia is a vital part of market diversification for Canadian production and essential in the face of imminent U.S. climate policies which could limit the flow of bitumen across the 49th parallel.
“For sure, the U.S. isn’t going to like (export to Asia). But that’s good, because it gives us more leverage with the U.S.,” Cooper said. “For example, it makes it more difficult for the U.S. to threaten us with comments about dirty oil.”
Alberta, CAPP agree Similar views have been strongly expressed by the Alberta government and the Canadian Association of Petroleum Producers, whose President David Collyer said earlier this year that the Far East is the “only realistic alternative” if the U.S. started to restrict access to its markets for oil sands production.
Two months ago, Tom Katinas, chief executive officer of the Syncrude Canada oil sands consortium, told a conference he would welcome infrastructure to the British Columbia coast “to be able to export some of the Alberta oil.”
Interest in pipelines targeted at Asia has been jolted back to life in recent months with the investments in Canada’s upstream by state-owned PetroChina and the Korean National Oil Corp., both of which have taken sizeable positions in oil sands leases.
Enbridge ready to file Pending the release of terms of reference for an environmental review of the Northern Gateway proposal, Enbridge Chief Executive Officer Pat Daniel said Nov. 4 his company is ready to make its regulatory filing no later than early 2010.
“We have strong support for Gateway (which includes plans for a 525,000 bpd export pipeline).
“It is fair to say both Canadian producers and Southeast Asian refiners feel the concept around gateway makes sense in terms of improving netbacks for Western Canadian producers and broadens out access to crude supply for Asian refiners,” he said.
Assuming passage through the regulatory process — although stiff environmental, aboriginal and landowner challenges are anticipated — Gateway could be in service in 2015 or 2016.
Until the application is filed, Enbridge will not say whether it has any firm shipping contracts.
But it did disclose a year ago that it had raised C$100 million from Western Canadian producers and Eastern Asian refiners through the sale of 10 units at C$10 million apiece to help finance the regulatory application. In return, those unnamed sponsors have an option to acquire founder shipper status and make an equity investment in Gateway, which was last estimated to cost C$4.25 billion.
Although Enbridge has indicated that it is concentrating on lining up customers in Japan and South Korea, there is the prospect that PetroChina might return to the scene two years after passing up its chance for a 49 percent equity stake in Gateway because of what it said was a lack of support from the Canadian government and producers.
Now that it has spent C$1.89 billion to acquire 60 percent interests in two oil sands leases owned by Athabasca Oil Sands, which could yield about 500,000 bpd from reserves of 5 billion barrels, PetroChina will have to settle on a destination.
In addition to Gateway’s planned 36-inch line to British Columbia’s deepwater port at Kitimat, the project involves a 20-inch diluent line to carry 193,000 bpd of imported condensate to Edmonton to facilitate the flow of bitumen.
Kinder Morgan placed to compete Taking a lower profile, Kinder Morgan is strongly placed to compete with Enbridge in the race to Asia.
About 10 percent of its current Trans Mountain volumes are believed to reach Asia, where refiners are testing their ability to handle Canadian heavy crude.
Those tanker shipments across the Pacific reached a record 134,000 bpd in March and, through the first eight months of 2009, were up an average 150 percent from the same period of 2008.
Kinder Morgan is currently weighing plans to boost Trans Mountain capacity by either 80,000 bpd or 320,000 bpd, indicating a decision will be made in the next three to six months.
It is also negotiating with Vancouver port authorities to allow the use of Suezmax tankers, which can carry 1 million barrels and reduce the shipping costs to Asia by C$1.50 per barrel.
Kinder Morgan also has the option to build a northern leg from Trans Mountain to Kitimat to carry 400,000 bpd.
But Kinder Morgan’s Canadian Chief Executive Officer Ian Anderson has conceded it is not clear whether the moratorium on exploration in offshore British Columbia would affect tanker traffic out of Kitimat.
| 